From the Securities Lending Trading Desk

In the Americas, the online pet pharmacy, PetMed, saw sales remain flat against last year at $60.1 million. In Asia, two of the world’s largest shipbuilders are set to combine forces in an attempt to thwart competition from Chinese rivals. In Europe, Wirecard shares fell up to 31% as reports of forgery mire the payment processing provider.

Americas

We saw a pick up in directional demand for PetMed Express(PETS) after shares fell 10%, hitting a 52-year low on 1/22 after announcing fiscal third-quarter earnings results that fell short of market expectations. The online pet pharmacy saw sales remain flat against last year at $60.1 million. Analysts were anticipating $64.3 million. Overall, the company said profits were down 14% blaming increased competition that forced additional discounts that did not result in additional sales. One analyst predicted headwinds for Q4 stating the company will have to continue to be aggressive with pricing and promotions just to maintain market share, so there will not be any recovery in the near future. The recent uptick in short interest coupled with an upcoming dividend record date on 2/4 has caused borrowing fees to tighten modestly.

There has been a recent spike in bearish sentiment for Overstock.com (OSTK) the e-commerce platform, as their share price surges, up approximately 14% after their much anticipated tZERO crypto-currency platform finally launched. The tZERO subsidiary is a cryptocurrency exchange that seeks to become an alternative way of selling security tokens. Despite the successful launch, one analyst indicated this is a drop in the bucket compared to the terrible losses OSTK stock incurred last year. The company is now almost solely a blockchain investment and the newly launched tZERO does not do anything unique as security tokens have been around for some time now. In addition, cryptocurrency markets have been taking a beating lately. As short interest rises, fees to borrow have tightened in kind.

Asia Pacific

One of Japan’s leading automobile brake makers fell sharply in trading last week after the Nikkei Asian Review said the company was seeking a capital injection from its top shareholder. According to the Nikkei, Akebono Brake Industry is seeking financial help from Toyota Motor and relief from several bank lenders as it tries to turn around its fortunes under a private workout scheme. The company has been struggling of late after failing to secure orders for new models from U.S. automakers and is seeing continued pressure on margins as a result of intense pricing cuts from its clients. We have seen long term lending demand for Akebono Brake, which has seen its share price decline by over 50% since June last year.

Two of the world’s largest shipbuilders are set to combine forces in an attempt to thwart competition from Chinese rivals. Hyundai Heavy Industries Group signed a conditional agreement with Daewoo Shipbuilding & Marine Engineering late last week to take control of its rival, according to a statement issued by the top shareholder of Daewoo. The move by the two South Korean giants comes as their dominance in the ship manufacturing sector continues to erode, as competition intensifies particularly from China where industry consolidation is likely to take place in the near future. Analysts believe that taking control of Daewoo Shipbuilding will boost Hyundai Heavy’s sales by almost 50 per cent and strengthen its manufacturing capabilities. We witnessed increased securities lending demand for Daewoo Shipbuilding following the announcement of the news.

Europe

Wirecard shares fell up to 31% as reports of forgery mire the payment processing provider. Lending demand increased for Wirecard AG (WDI GY) this week following reports that evidence of forgery and falsification of accounts had been found at the online payment provider. The Financial Times reported that lawyers hired by Wirecard had identified potential civil and criminal violations in Singapore, Hong Kong, India, Malaysia and Germany. Wirecard has previously been a popular lending name with Short Interest reaching as high as 22% of free float in 2017. Short Interest has since dropped as low as 0.5% but has been gradually increasing to current levels of 3.5%. Industry lending utilization is generally low at 16% of available quantity.

Norwegian Air fell for the second week in a row as the airline announced a surprise rights issue. Following a share price fall of up to 26% last week, shares in Norwegian Air (NAS NO) fell again, the most on record (32%), following the announcement of a $353m rights issue. The announcement comes after news broke last week that a potential takeover from IAG, which owns British Airways, was ruled out. The rights issue, due to begin trading on the 22nd February, has been fully underwritten by Norway’s richest man, John Fredriksen. Short Interest has steadily increased from 5% in May 2018 to 13% at present. Industry lending utilisation is generally high at 71% of available quantity.