From the Securities Lending Trading Desk – Week of February 25

In the US last week, investors reacted positively after Yeti (YETI) reported encouraging fourth-quarter earnings where sales beat street forecasts. In Asia Pacific, Investors dumped shares in Bingo Industries after it downgraded its full year profit forecast by 20 percent last week. In Europe, Wirecard (WDI GY) is back in the news this week after a German regulator introduces a short sell ban on the Bavarian payment processor.

Americas

There has been increased demand for the outdoor gear company, Yeti (YETI), as their share price trends upwards, reaching a new post-IPO high from when they went public last October. Last week, investors reacted positively after the company reported encouraging fourth-quarter earnings where sales beat street forecasts. They also set a positive guidance outlook for 2019. Shares have risen roughly 63% so far this year. However, with market utilization up 33.9% over the past week this signals bearish sentiment with regards to whether management can deliver on these lofty expectations for 2019. One analyst suggested there is a significant risk the company’s high-end products will lose additional sales to cheaper products that could limit future growth. Fees to borrow have risen higher on the increased short interest.

Accelerate Diagnostics (AXDX), a diagnostic system developer, remains a focus of demand as the share price has climbed approximately 87% so far this year, making it one of the most shorted stocks in the Russell 3000. There was additional short interest ahead of their earnings release this past week in which the company’s reported net sales fell short of consensus estimates. The company had a loss of $22.2 million in its fourth-quarter as the sector expands, but at a slower rate. The additional demand in an already crowded space further tightened market supply driving up borrowing costs.

Asia Pacific

A poor profit outlook from a leading Australian waste management company sparked a sell off of its shares last week. Investors dumped shares in Bingo Industries after it downgraded its full year profit forecast by 20 percent last week. The company cautioned investors that a much faster decline in the apartment construction market has cut volumes in its building and demolition collections business, while a decision to delay price rises to customers is also likely to dent profits. Although the company acknowledged that the revised guidance was disappointing and below expectations, they believe that the outlook for the company remains positive. We have seen increased securities lending demand for Bingo, which saw its shares decline by over 40 per cent last week.

One of Australia’s largest niche exporters tumbled in trading last week after announcing disappointing sales figures. Vitamins and supplements powerhouse Blackmores reported that half-yearly sales in the lucrative Chinese market dropped by 11 per cent and provided guidance that the outlook for the second half of 2019 would be weak. In recent years Blackmores, along with several other firms such as a2 Milk Co and Bellamy’s Australia, have taken advantage of a growing demand for vitamins and supplements from China’s increasingly health conscious middle class by posting double digit growth in sales to the country last year. However, Blackmores cited the impact of the ongoing trade war between China and the US and a slowdown in the Chinese economy as reasons for recent softer consumer confidence. We have seen strong long term securities lending demand for Blackmores, which has declined by almost 40 per cent in the past year.

Europe

European rights trading period starts this week spurring an increase in securities lending demand. Montea (MONT BB) is raising as much as EU160m in 2-for-9 rights offering priced at EU56.20 a share. The trading period is running from February 22nd until February 28th. Whilst there has been a positive spread between the ordinary shares and the rights, lack of liquidity on the rights is currently a challenge. Finally, Norwegian Air Shuttle (NAS NO) is raising NOK500m in a rights issue at a subscription price of NOK15.01. The trading period is running from February 22nd until March 6th. There is currently limited opportunity in the trade as the spread between the ordinary shares and the rights is modest. We continue to monitor both opportunities.

Wirecard (WDI GY) is back in the news this week after a German regulator introduces a short sell ban on the Bavarian payment processor. The regulator, better known as BaFin, prohibited investors from taking new short positions or increasing existing ones through April 18, citing recent price volatility and its risk of undermining the broader stock market. Shares in the firm have fallen as much as 42% in the past month after a series of reports in the Financial Times alleged fraud at the firms Singapore unit. Crispin Odey a British based hedge fund manager who made an estimated $18 million in the share price fall of Wirecard said that he was now excited now to pursue BaFin in a litigation case for their interference.