From the Securities Lending Trading Desk – Week of May 6th

In the Americas, New Age Beverages Corp. (NBEV) remains a directional focus name. In Asia Pacific, Chinese automobile manufacturer Great Wall Motor Company’s shares slipped. In Europe, securities lending demand for Thomas Cook (TCG LN) increased.

Americas

There has been an uptick in directional demand for Tesla Inc. (TSLA) as shares spiraled downward to a 52-week low after first-quarter earnings fell far below Wall Street expectations. The company reported an adjusted loss of $2.90 per share for Q1, well below analyst estimates of 69 cents. Revenue came in at $4.54 billion which was below the estimated $5.33 billion. Not long ago, CEO Elon Musk, proclaimed that he was done asking Wall Street for money but after the disappointing earnings report, the cash-burning company once again must tap into the capital markets for a much needed cash infusion. They recently announced a $2.7 billion cash raise through debt and stock offerings which investors viewed as positive sending the share price surging higher. However, waning electrical vehicle demand and balance sheet concerns has put Tesla back in the spotlight among short sellers causing borrowing fees to trend higher.

New Age Beverages Corp. (NBEV) remains a directional focus name as questions mount surrounding their new distribution deal with Walmart. The company’s stock price jumped 38% on April 8 after the announcement but has since retreated. Many investors feel that NBEV needs to live up to expectations of the deal or it could be one and done. Walmart is known to not hesitate in pulling products off the floor if they don’t perform. In the fourth-quarter, the company reported revenues higher than consensus estimates but their operating loss more than doubled from Q4 2017. New Age is scheduled to release its 2019 first-quarter earnings on May 9. Persistent bearish sentiment has kept fee levels elevated.

Asia Pacific

Chinese automobile manufacturer Great Wall Motor Company’s shares slipped after the company announced a steep profit decline. The company announced profits that were down 63% year-over-year despite an 11% increase in sales volume growth. Analysts remain skeptical that the company will be able to solve core issues, including a weak model line-up and lack of pricing power. We saw an increase in lending demand for Great Wall Motor Company following the earnings announcement.

Australian conglomerate Wesfarmers Ltd bid A$776 million ($545 million) for Lithium miner Kidman Resources Ltd to gain exposure to the expanding lithium market. The bid was at a 47% premium to the Kidman Resources Ltd share price and would give Wesfarmers Ltd a 50% share of an existing joint venture with Sociedad Quimica y Minera de Chile SA (SQM). Kidman Resources Ltd has already struck supply deals with Tesla Inc., battery producer LG Chem Ltd, and Mitsui & Co as part of the SQM joint venture. We saw strong lending demand for Kidman Resources Ltd following the news.

Europe

Thomas Cook falls as much as 25% as analysts question the viability of a possible sale. Securities lending demand for Thomas Cook (TCG LN) increased this week as financial backers reportedly suffered losses to exit the group’s loans facility. Further, analysts deemed a possible sale of the company challenging based on expected financial results. Both the ordinary shares and corporate bonds of the group fell following the reports with the share price currently down 25% from its opening price at beginning of the week. Reuters reported that the travel operator had set a deadline of the 7th of May for indications of interest in its ailing airline business. Short Interest in the group has steadily risen from 1% this time last year to current levels of ~8%. The CDS market implied default probability over the next five years is now 74% according to Bloomberg.

Sirius Minerals announced plans to raise up to $3.8 Billion to fund its next stage of operations at its UK Potash mine. Shares in exploration company Sirius Minerals (SXX LN) dropped as much as 26% this week as it announced extensive financing plans of up to $3.8B including an issuance of up to $400M of new shares and over $600M of convertible bonds. Alongside the dilution element of issuing new shares, the share price took a hit after the company announced that a $2.5B credit facility it required was not yet confirmed. If unsuccessful, operations would have to be ceased until new funding can be found. The news resulted in increased lending demand and short interest is at highs of 15%.