From the Securities Lending Trading Desk – Week of April 29th

In the Americas, lending demand commenced on the heels of highly anticipated IPOs from Pinterest and Zoom Video. In Asia Pacific, shares in FIH Mobile soared after its major shareholder announced his intention to run for Taiwan’s presidency. In Europe, payment and processing servicer, Wirecard, has been a focus for lending demand following the end of its short sale ban.

Americas

Lending demand commences on the heels of highly anticipated IPOs from Pinterest and Zoom Video. Pinterest, the personal-interest social networking site, has surged over 40% in price after its first week of trading on the back of a reported 291 million monthly active users. Topping that figure, Zoom Video, the cloud-based video meeting service, is up 75% over its IPO price as investors flock to get a piece of a company that they view as having a huge upside. As is common with IPOs, lending fees initially spiked in the early trading periods with a quick recession as more shares entered the market.

Investors have begun to pile into Evolus Inc. after witnessing a 150% price increase since Christmas and a 37% increase in the last month alone. The medical aesthetics company has been in the news this year after the Food and Drug Administration approved its new drug Jeuveau, which is a clinical neurotoxin created for the treatment of frown lines. Evolus plans to compete directly against Allergan’s mega-drug Botox. In the lending market, fee levels have spiked as industry utilization nears 99%.

Asia Pacific

FIH Mobile’s share price has seen a remarkable rally in recent weeks after its major shareholder announced his intention to run for Taiwan’s presidency. Terry Gou, the billionaire founder of Foxconn Technology Group, announced on 17th April that he would run for president in 2020 on behalf of the China-friendly opposition Kuomintang party. Shares in one of Foxconn’s HK-listed affiliates, FIH Mobile, soared by as much as 50% amid a speculative buying frenzy by investors who believe Guo’s pro-China stance may benefit the company in the long-run, should he win the election. However, some analysts have expressed concerns that should Guo become president it may negatively affect Foxconn’s transformation plan from a device assembler to a technology-solutions provider, as Gou will most likely need to distance himself from the day-to-day operation of the business. We have seen strong securities lending demand for FIH Mobile since the announcement of Gou’s bid.

Japanese technology giant Hitachi intends to sell its stake in its chemical subsidiary as it seeks to focus its resources on infrastructure and factory automation processes. According to Nikkei news, the company will look to take bids for Hitachi Chemical as early as May with several domestic rivals such as Mitsubishi Chemical Holdings, Mitsui Chemicals and Sumitomo Chemical all potentially interested. Hitachi owns a 51% stake in its chemical unit but has said no formal decision has been made for the disposal and that it is still considering several options to streamline its businesses. We have seen limited securities lending demand for Hitachi Chemical, which has seen its share price rally by almost 80% so far this year on speculation of a potential sale.

Europe

An end to its short sale ban signalled the beginning of a week of news and volatility for Wirecard. The German payment and processing servicer was the focus of lending demand once again this week after a 2-month short sale ban by the German regulator expired. Following expiration of the ban, the share price saw declines of up to 8% and short interest increased from 14% to 17%, according to Bloomberg. Midweek, earnings were accompanied by news that Softbank had purchased EUR 900M of convertible bonds to mark the beginning of a strategic partnership between the telecommunications and payment providers. Shares rose 15.51% following the news, only to drop 10% following a new Financial Times article associated with its investigation into the accounting practices of the company and the sources of its revenue and associated partner companies.

Belgian real estate company Aedifica increased its Earning Per Share (EPS) guidance and announced a significant rights offering. Lending demand increased for Aedifica this week as it accompanied news of an increase in its expected 2019 EPS with a EUR 418M rights offering which equated to almost a third of its Market Capitalisation. Aedifica announced that existing investors can buy 1 new share for every 3 already owned at EUR 68.00 apiece, a 13% discount to the price of its ordinary shares at the time of writing. The trading period started on the 25th April and is due to end on the 2nd May.