From the Securities Lending Trading Desk

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We are seeing continued bearish demand in the renewable energy sector, specifically for SunPower Corp (SPWR). SNAP Inc rallied 44% in its first day of trading, driving interest from borrowers as they look to gauge availability and borrow costs. In Europe, demand for the Italian Genoa lender Banca Carige Spa increased last week as it looks to strengthen its finances.

Below please find the March 7 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. 


We are seeing continued bearish demand in the renewable energy sector, specifically for SunPower Corp (SPWR). As we anticipated back in November, we are seeing more interest in this sector as the Trump administration focuses on bolstering domestic energy sources such as coal, oil, and gas while potentially ending or limiting federal tax incentives for solar and wind. SPWR’s share price fell throughout 2016, from a high of $30.46 on January 5 to a low of $6.30 on November 9. Despite a recent rally, SunPower’s share price continues to hover around $8. Uncertainty with regard to global trade policies, incentives, and subsidies will likely result in strong headwinds for the sector throughout 2017.

Ohhh, SNAP! IPO rallies 44% in its first day of trading. The market has been anticipating the IPO of Snap, Inc., the first big tech IPO since Twitter (TWTR) back in 2013. Now investors are looking for SNAP to prove it is not TWTR, which opened up 73% in its debut, but has since reversed course, and is now down by about 39% from the IPO. Some analysts are critical of SNAP’s valuation amid concerns regarding slowing user growth and competition from the likes of Facebook, Instagram, and Twitter. Shares will be tradable in the securities lending market on March 7. From a demand perspective, we are seeing interest from nearly all of our borrowers as they look to gauge availability and borrow costs. Snap’s lead IPO underwriters are Morgan Stanley and Goldman Sachs Group Inc. (GS as stabilization agent) with more signed up as IPO co-managers, including Deustche, Barclays and Credit Suisse.

Asia Pacific

An independent shareholder in one of China’s largest suppliers of industrial gases is actively bidding for a board seat in the company as it becomes the subject of a rare public battle over power in an Asian boardroom. Oasis, a Hong Kong based hedge fund, owns 4.5% of Yingde Gases and is asking for representation at the table even as the existing board has split into two rival factions, each seeking to oust each other. Oasis has been vocal in its approach by requesting a robust review of the company’s strategic options, though it has shied away from taking any sides in the increasingly public dispute. We have witnessed increased securities lending demand for Yingde Gases in recent weeks with its shares rising by over 120% this year since the announcement in January of a $1.3 billion offer for the company from US firm Air Products, which has since been surpassed by a $1.46 billion rival bid last week by buy-out firm PAG Asia Capital.

Noble Group Ltd posted a small profit allowing the firm to narrowly avoid posting back to back annual losses. Net profit totaled $8.7 million last year compared with a loss of $1.7 billion in 2015. The commodities trader is still recovering after a two year commodity price rout led to a credit rating downgrade and forced asset sales. Shares fell last week after Iceberg Research issued another critical report on the company’s finances. Noble Corp Ltd also recently announced it is in talks with a potential investor. We have seen long term lending demand for Noble Group Ltd.


Aerospace and technology provider Cobham announced the launch of a £500 million rights issue this week which has brought the stock to borrowers’ attention. The issue is looking to reduce the company’s debt which stood at £1billion at year-end. The announcement follows a turbulent 15 months for the provider during which five profit warnings had been raised, resulting in a pretax loss of £847.9 million, an increase from the previous £39.8 million. The losses are due to three periods of charges and write-downs costing £1 billion each while the company also missed out on a £150 million deal with the US Air Force. The deal follows a cash-call last year of a similar size where the company was battling high debts due to acquisitions.

Demand for the Italian Genoa lender Banca Carige Spa increased this week as it issued a statement saying that it will seek to strengthen its finances. The lender is planning on raising 450 million euros while also restructuring 2.4 billion loans in a new vehicle owned by the bank’s shareholders. The plans come at the request of the ECB who recommended that the lender cut its gross non-performing exposure of 7.4 billion euros in half by 2019, and meet the 2020 tier 1 common equity ratio of 14.1. As of December 2016 the banks ratio stood at 11.4%.