From the Securities Lending Trading Desk

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We have seen strong initial demand for Yext, Inc. (YEXT), the digital media technology services company that went public last week. There was a sharp increase in lending demand for Chinese property developer Evergrande as investors bet its share price rally will be difficult to sustain. In Europe, short interest increased for domestic-focused French small cap stocks ahead of the nation’s presidential election.

Below please find April 25’s 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.


After falling to a 52-week low, GNC Holdings, Inc.’s (GNC) share price is trending higher, largely due to a short squeeze. Bearish demand for GNC has been strong amid headwinds including increased competition from the likes of Vitamin Shoppe (VSI) and Amazon (AMZN), stale product offerings, and concerns regarding lower sales and margins. These factors have ultimately affected cash flow for the wellness and performance specialty retailer. On April 7, GNC fell to $6.65 per share, a 52-week low, but quickly trended higher as bears exited their shorts. This week, GNC reported a modest earnings beat and a huge revenue beat on EPS of $0.35 and revenue of $644.8 million. Quarterly revenue easily topped consensus analyst expectations of $627.4 million.

We have seen strong initial demand for Yext, Inc. (YEXT), the digital media technology services company that went public last week. Yext has been rallying in the early days, with shares trading as high as $14.25, after pricing at $11 for its IPO. Despite having lost $43 million on revenue of $124 million in its past fiscal year, YEXT’s co-founder says it has clear visibility into its revenue growth and billings for the foreseeable future. Yext works with customers to manage their digital listings across more than 100 third-party providers such as Apple’s iOS, Google search, and Facebook. We often see heavy demand for IPO stocks that come out of the gates strong amid high expectations, despite many uncertainties for the newly public company.

Asia Pacific 

Shares in Chinese property developer China Evergrande Group continued to rise in Hong Kong trading as property prices surged and debt concerns eased. China Evergrande Group shares are up 71% in 2017 despite the company being one of China’s most indebted developers. Since January, China Evergrande announced a series of cash injections from strategic investors plus a plan for a ‘back-door’ listing on the Shanghai stock exchange designed to ease the company’s substantial debt burden. We have seen a sharp increase in lending demand for China Evergrande as investors bet the share price rally will be difficult to sustain.

Rising regional tensions, as well as increased competition from the opening of new resorts in neighboring countries, is weighing down on one of South Korea’s largest casino operators. The opening of Paradise City, a joint venture between South Korean firm Paradise Co and Japanese slot machine maker Sega Sammy Holdings, has been marred by a travel ban imposed on Chinese tour groups visiting South Korea. The ban is in retaliation for the implementation of a missile defense system by the government that has angered its Chinese counterparts. Visitors from China usually account for half of South Korea’s foreigner gaming revenue and there are concerns that rising political tensions, as well as the opening of new resorts in Japan, Macau and the Philippines, will dent future earnings for South Korean casino operators. We continue to witness long term securities lending demand for Paradise, which has already seen some effects of the tourism restrictions as it reported a year on year decline in March revenue of 11 percent to 39.3 billion won ($34.54 million).


Short interest increased for domestic-focused French small cap stocks ahead of the nation’s presidential election. CAC 40 names derive roughly 75% of sales from outside France, possibly a chief reason these large caps didn’t see borrowing demand increase leading into the French presidential election. Similar to the FTSE 100 index in UK following Brexit, a drop in the Euro could favor CAC 40 members. In comparison, several French small caps have seen a sell-off in shares and amplified demand due to their exposure to the French economy. Parrot, Maurel, Rallye, Eramet, CGG and Bourbon all experienced elevated fees and utilization demand heading into last weekend’s French election.

Last week was the beginning of the trading period for Cobham Plc rights issue. The British defense supplier embarked on its second rights issue in less than a year after repeated earnings setbacks had forced the company to set about a two year turnaround program. The issue is looking to raise £500 million pounds in a 2 per 5 rights ratio running from the April 19 through May 4th with a subscription price of 75 GBP. The spread has been hovering around negative 2 pence per share since April 19, which has brought interest from borrowers for the rights line as they look to capitalize by selling the rights and buying the cheaper existing ordinary shares. As we have seen however, with the Tullow Oil Plc rights issue, there is potential for the spread to turn positive which should see demand flip back to the ordinary shares.