From the Securities Lending Trading Desk

Amidst a rocky week in the US stock market, Pinduoduo’s ADRs bucked the trend and reported extraordinary growth. One of China’s largest smartphone makers delivered strong revenue results in the third quarter despite a slowdown in the global market. In Europe, The Restaurant Group’s (RTN LN) potential takeover of Wagamama continued to divide shareholder opinion as large shareholders released their views on the potential deal.

Americas

Surging e-commerce platform Pinduoduo Inc. rises while the rest of the market falls. Amidst a rocky week in the US stock market, Pinduoduo’s ADRs bucked the trend and reported extraordinary growth. PDD’s stock price rose by as much as 17% on the back of a 700% increase in sales revenue, year over year, and average monthly active users tripling. The abrupt spike in price from an all-time low in mid-November set off widespread borrower demand and a swelling lending fee. Chief Executive Officer Colin Huang cited the company’s massive boost in marketing spending and SG&A expenses as the reason for the increase. Pinduoduo is in direct competition with e-commerce giants like Alibaba and JD.com.

A NASDAQ delisting amid an SEC accounting probe has led MiMedx Group’s share price to tumble. Accusations have surfaced that MiMedx has been booking sales of products which had never been ordered, for years. MiMedx is currently under investigation by the US Justice Department as well as the SEC and was delisted on the NASDAQ on 11/8. The company will now trade OTC as it faces the prospect of restating five years of financial records and answering to the pending federal query. Lending fees and utilization have spiked, in kind.

Asia Pacific

One of China’s largest smartphone makers delivered strong revenue results in the third quarter despite a slowdown in the global market. Xiaomi Corp’s expansion into India and Southeast Asia resulted in the company reporting a net profit of Rmb 2.9 billion ($418 million) after incurring a loss in the same period a year earlier. Xiaomi’s success has been a result of higher sales in the premium phones and home devices market and the company plans to expand further in India, where it has a 30 per cent market share. However, some analysts are becoming increasingly pessimistic on Xiaomi’s future earnings as the global smartphone market is showing signs of cooling, particularly in China. We have seen strong long-term securities lending demand for Xiaomi, which has declined by 15% since it went public in July this year.

China’s biggest developer by sales raised HK$7.8 billion ($1 billion) in a convertible bond sale last week. Country Garden Holdings said it would use the proceeds of the sale to help fund a repurchase of zero-coupon convertible bonds due in January and use any remaining proceeds to refinance offshore debt. The property developer, which has started to offer discounts for a new development in Hong Kong at below cost price, has seen its share price decline by 35 per cent in 2018. Investors have raised concerns that mainland developers such as Country Garden may have overstretched themselves after buying land at ultra-high prices in the past two years, which could result in losses as there are signs that the city’s overheated property market is starting to cool off. We saw moderate securities lending demand for Country Garden following the convertible bond sale.

Europe

Lending demand for AMS SW continues as the Apple supplier declines further this week.  Lending demand remains strong for technology provider AMS (AMS SW) as the communication supplier continues to suffer the fall-out from the recent market rout in the tech sector. Short Interest in AMS has increased steadily since the first half of the year and is currently at 34% of Free Float. AMS, an Apple supplier, has suffered from the contagion associated with growing concerns of sluggish iphone sales and has followed the declines of similar businesses. It is currently 74% down YTD.

The Restaurant Group’s potential takeover of Wagamama continued to divide shareholder opinion. The Restaurant Group’s (RTN LN) potential takeover of Wagamama continued to divide shareholder opinion as large shareholders released their views on the potential deal. Schroders (5.86%) and Royal London Asset Management (5.7%) have publicly supported the deal whilst Columbia Threadneedle (7.7%) have spoken against the proposal. Voting for the deal, which includes a substantial rights issue, takes place on the 28th November. Since its announcement, shares are down 20% YTD and short interest remains high at 10% of Free Float.