From the Securities Lending Trading Desk

In the Americas, we are seeing strong broker demand for Roku Inc. as the share price fell roughly 20%, reversing the nearly 90% gain over the first two days of trading. This week, shares for Japan Display Inc. group soared a record amount after reports that affiliate, JOLED, is planning to raise funds for mass production of next-generation OLED panels. Meanwhile in Europe, Elis, the rental and cleaning company, will offer Convertible 2023 Bonds for up to EU400M.

Below please find this week’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. 

Americas 

We are seeing strong broker demand for Roku Inc. (ROKU) as the share price fell roughly 20%, reversing the nearly 90% gain over the first two days of trading. We often see strong broker demand for IPOs that rally in the first few days of trading as investors question whether the valuation is sustainable. ROKU went public at $14.00 per share on 9/27 and rallied to $26.54 on 9/29. Since then the share price has been unable to maintain that high mark and has been trading between $20.81 and $23.56. As brokers approve larger sized shorts on ROKU, we are seeing fee levels climb higher as availability remains limited despite shares settling into the market. Some analysts are comparing ROKU to SNAP, which has similar price movements in their first few days as a public company. We anticipate continued demand as uncertainty and speculation surround the stock.

Shares of Greenhill & Co. were in focus after the company announced a tender offer as part of their recapitalization plan. According to reports, “the company expects to issue $300 million of debt plus $20 million of equity, which will be used to refinance existing debt and buy back millions of shares of stock. The buyback will start with a tender offer to repurchase up to 9 million of stock at $17 per share”. The share price has rallied 16% since announcing the plan back on 9/25 and closed at $16.60 on 10/4. The expiration date is 10/25 and we anticipate continued demand throughout the trading period.

Asia Pacific

Tibet Water Resources Ltd was again forced to defend itself following the release of a negative short seller report. Iceberg Research issued a report questioning the company’s accounting practices and business model. Tibet Water said the allegations were “false, malicious and misleading” in a stock exchange filing and the company may take legal action. Tibet Water Resources Ltd shares fell in HK trading following the report’s release. We have seen strong long term lending demand for Tibet Water Resources Ltd.

Shares for Japan Display Inc. group soared a record amount after reports that affiliate, JOLED, is planning to raise funds for mass production of next-generation OLED panels. JOLED has developed technology which could allow it to compete with Korean manufacturers in the fast growing OLED market. JOLED is seeking to raise $900 million from several dozen Japanese companies including Sony Corp., Nikon Corp. and Canon Inc. The company expects to mass produce new OLED panels up to 40% cheaper than South Korea manufacturers. We have seen strong long term lending demand for Japan Display Inc.

Europe 

Another tender offer drives securities lending demand. Hansteen announced a proposed GBP580M tender offer at 140p/Share, which will run from 4th October to 3rd November. The General Meeting will be held on 25th October with the results of the tender to be released on the 6th November. Fees have been increasing particularly for guaranteed take no action stock.

Elis, the rental and cleaning company, will offer Convertible 2023 Bonds for up to EU400M. There was strong initial securities lending demand, however with 3-4million shares needed to hedge the deal, there was enough liquidity in the lending pool to prevent lending fees spiking.