From the Securities Lending Trading Desk

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In the US, we continue to see increased demand for Ziopharm Oncology Inc., as their share price remains under pressure, falling 38% YTD. Australian aged-care providers have seen a large decline in shares after the government announced more stringent guidelines on fees. Asia has seen demand rise for KuangChi Science, who unveiled ambitious plans to invest in space travel and a future technology theme park. In Europe, Sports Direct’s share price fell by nearly 12%.

Below please find the September 13 edition of From the Trading Desk, which provides timely commentary about top security earners, revenue drivers and other factors influencing the securities lending market from the BBH Securities Lending Trading Team.

Americas 

We have seen increased demand for Ziopharm Oncology Inc. as their share price remains under pressure. The biopharma company has seen its price fall roughly 38% YTD as results reported in their preclinical and clinical trials suggest they will not commercialize any cancer drug treatments in the near future. One analyst indicated that Ziopharm Oncology Inc. is a troubled company. As short interest continues to build, coupled with limited market liquidity, fee levels have been trending higher.

Investors continue to punish Plug Power Co., hammering the stock price down to a 52-week low last week and fuelling bearish sentiment. Plug Power earnings in the last quarter fell just short of estimates of negative $0.06 per share, at negative $0.07 EPS. They reported a $15.8 million in negative operating cash flow for the first six months of 2016. In addition, some investors are wary of a risky balance sheet with another $24 million in long-term debt packed on during the most recent quarter. The strong borrower demand has kept fee levels elevated.

Asia Pacific 

Several Australian aged-care providers have seen large share declines in recent weeks after the government issued guidelines that signalled tighter rules on fees for services and refurbishments. The Australian government’s health department announced last week that it will no longer allow senior-care providers to charge certain fees related to projects known as capital refurbishment. In addition the government also indicated that it will likely rein in funding for the industry, which many of the providers have become heavily reliant on in recent times. We have witnessed an increase in securities lending demand for leading companies in the sector such as Estia Health, Japara Healthcare and Regis Healthcare, which have seen sharp declines of as much as 50% this year.

China’s answer to Elon Musk’s SpaceX has arrived in the form of a leading technology firm, which has unveiled ambitious plans to invest in space travel and a future technology theme park. Hong Kong-listed KuangChi Science announced last week that it will spend $1.5 billion on a series of projects, such as a ride that will give visitors a sensation of space travel, and a high altitude balloon that will take tourists to 24km above the earth. Although the plans are somewhat less ambitious than other similar initiatives, such as Virgin Galactic, it comes hot on the heels of the challenges facing SpaceX, after one of its pilotless rockets exploded after launch recently. We have witnessed increased securities lending demand for KuangChi Science which has declined by nearly 25% since May 2016.

Europe 

Dutch cable provider Altice’s all-stock bid for French unit SFR Group brings a risk arbitrage fund to the table. Altice agreed to buy the 22.25% it doesn’t yet own in SFR, at a ratio of 1.6 Altice for every 1 share SFR. As of last Thursday’s close, the deal is valued at approximately EUR 2.43 billion euros and a 1.2% spread in the trade. Altice trades in the warm fee range and is expected to creep into mid-range levels towards expiry. There is healthy appetite for guaranteed untendered SFR borrow.

Sports Direct’s share price tumble sparks securities lending demand. Sports Direct’s share price fell nearly 12% on Wednesday after they announced earnings are expected to fall over 20% this year. They also ruled out any takeover speculation but announced to buy back 5% of shares up to a maximum value of £89 million.