From the Securities Lending Trading Desk

This week the US are seeing increased demand for Overstock.com Inc. as interest and speculation grows around Bitcoin. Korean pharmaceutical manufacturer Celltrion Inc’s market value surged by over USD 8 billion in seven days making it the third largest company on the Korean stock exchange. Whilst in Europe, Tele2 AB’s acquisition of Com Hem Holding AB creates Sweden’s second largest mobile service and fixed broad band provider.

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 increased demand for Altice USA, Inc. (ATUS) after Altice N.V. announced plans to spin off the Dutch company’s 67% stake in ATUS. This transaction is expected to be completed sometime in the second quarter. Each ATC NA share is entitled to receive 0.4163 shares of ATUS US. It was also determined that ATUS will pay a $1.5 billion dividend to its shareholders prior to completion of the spin off. Shareholders of ATC NA must have the action approved by 2/3 and, according to sources; roughly 68% of these shareholder have already indicated they will vote in favor of the spin off. Fee levels are ticking up for both ATC NA and ATUS US.

As the share price has nearly doubled in the past month, we are seeing increased demand for Overstock.com Inc. (OSTK). On 1/8, the share price rallied to an all-time high of $86.90. Over the past six months, we’ve seen OSTK stock skyrocket more than 400% as the company revealed its plans to build out its cryptocurrency business and abandon its retail roots. In early December, the online discount retailer looked to redefine itself as a cryptocurrency mogul after launching the largest Initial Coin Offering (ICO) to date. The $250 million offering was made through Overstock’s own exchange tZero, revealing the blockchain empire they had quietly been building. According to Bloomberg, “Overstock currently owns 10 different blockchain companies, and the firm has been accepting payment for its goods in Bitcoin for the past four years. The company has also launched its own blockchain-powered exchange that allows users to trade coins and conduct ICOs called tZero, [that] complies with SEC and FINRA regulations”. As OSTK has only recently revealed itself as more than just an online discount retailer, and as interest and speculation grows around Bitcoin, we anticipate demand to remain strong.

Asia Pacific

Celltrion Inc.’s market value surged by over USD 8 billion in seven days making it the third largest company on the Korean stock exchange The Korean pharmaceutical manufacturer’s rise can be attributed in part to a successful 2017 launch of a new blood cancer biosimilar drug in Europe, and speculation that Korea plans to boost investment in the small cap Kosdaq market. We have seen some softening in long-term lending demand for Celltrion Inc. following recent share price rises.

Great Wall Motor Co. shares slid after China’s leading automaker announced a 2018 sales target that missed analysts’ estimates. The company set its volume target at 1.16m units which was significantly below analysts’ expectations. Great Wall Motor Co. shares fell sharply following the announcement on investor concerns that the company may lose market share in the domestic SUV market and face margin erosion. We saw moderate securities demand for Great Wall Motor Co. last week.

Europe

Tele2 AB announces acquisition of Com Hem Holding AB to create Sweden’s second largest mobile service and fixed broad band provider. The deal that was announced on Wednesday for 26.8 billion Kroner ($3.3 billion) is part of a strategy by Sweden’s Stenbeck family to challenge former monopoly Telia, as well as Norway’s Telenor ASA. The resulting company will create the market leader for digital TV and also the second largest in Mobile and fixed broadband services in the region. Com Hem holders will receive 37.02 kroner in cash, meaning a total cash consideration of 6.6 billion kroner, as well as 1.0374 Class B shares in Tele2 for each existing share of Com Hem. Securities Lending demand has remained muted with the EGM approving the deal set for the second half of 2018, and a completion date aimed for the end of the year.

South African property stocks fell the most in more than two years. There has been increased securities lending demand seen for South African property stocks on speculation that some of the companies are overvalued and might be named in a negative research report. The FTSE/JSE Africa Listed Property Index fell as much as 8.5%, the biggest drop since 2015. Greenbay Properties and Fortress Reit were both of particular focus after falling as much as 20%.