From the Securities Lending Trading Desk

In the US, as directional demand for Buckle(BKE) continues to be strong for the struggling retailer combined with high market utilization, fee levels have remained elevated. In Asia, Samsung Group’s biotechnology arm surged last week after it avoided a delisting. Bonmarche (BON LN) also suffered this week as the retailer blamed Brexit for a lack of trade

Americas

We saw increased demand for medical marijuana supplier Aphria Inc.(APHA) after a short seller said in a conference last week he expects the stock to go to zero. The news sent the company’s share price plummeting to a six-month low. The short analyst indicated he sees Aphria setting up for a giant asset write-off because they will have a hard time raising new cash. The report also claimed the company paid inflated prices for companies held by insiders in Latin America. This led to the stock’s first downgrade due to the increased uncertainty following the allegations. Aphria was already a target of short interest as bearish sentiment persists that cannabis related stocks are overvalued. With the new directional demand coupled with an already crowded short, fees to borrow increased.

Bearish sentiment continues to be high for casual apparel retailer, The Buckle(BKE) after reporting third-quarter earnings in late November that missed analysts’ estimates sending the share price downward.  The company reported 3Q revenue of $215.1 million which was down 4.1% year-over-year, to add to the disappointing results the retailer confirmed same-store sales for the three month period sank 1.4%. As directional demand continues to be strong for the struggling retailer combined with high market utilization, fee levels have remained elevated.

Asia Pacific

Hengan International Group Co shares fell in Hong Kong trading following the release of a negative short seller report. Bonitas Research accused Hengan International Group Co of using a web of inter-company related transactions to inflate its profits and cash balances. Shares fell 5.7% when the report was released, before being suspended at the company’s request. Shares resumed trading later in the week and the company released a statement calling the report’s allegations misleading and groundless. We saw only moderate lending interest for Hengan International Group Co following the report’s release.

Samsung Group’s biotechnology arm surged last week after it avoided a delisting. Shares of Samsung Biologics Co surged by over 20% after the Korean Stock Exchange’s evaluation committee decided not to delist the company. The company went into a trading halt in November 2018 after they were discovered to have broken accounting rules surrounding its IPO in 2016. The country’s financial regulators concluded last week that the stability and continuity of Samsung Biologics’ business outweighed the lack of management transparency and therefore made the decision to not delist the company. Despite the recent rally, the company has lost approximately $5 billion in value since it disclosed the potential accounting breach. We witnessed strong securities lending demand for Samsung Biologics Co since it resumed trading.

Europe

News on debt restructuring unwelcome for shareholders as Interserve drops 73% this week.  Interserve (IRV LN) suffered its largest intraday drop early this week as news of potential debt restructuring presented a dreary outlook for the outsourced service contractor. Interserve is currently 88% down for the year and has repeatedly looked to allay investor concerns that is not the next Carillion, despite multiple profit warnings and the collapse of an energy-from-waste initiative. Short Interest is at 10% and utilization is at 87% according to Datalend.

Bad news continues for the retail sector this week as Superdry and Bonmarche suffer further declines. As news emerged that shops, shopping centers and retail parks suffered one of their sharpest monthly falls in value since the financial crisis in November, Superdry (SDRY LN) issued its second profit in as many months citing unfavorable weather conditions as the main driver for a profit hit of around £11m. Shares fell 33% following the news, and YTD are down 82%. Short interest is at a yearly high of 5.3% of free float. Bonmarche (BON LN) also suffered this week as the retailer blamed Brexit for a lack of trade which it described as more severe than the recession which followed the financial crisis. Shares suffered a 55% drop following the news.