From the Securities Lending Trading Desk

This week we’ve seen a strong demand for ADT Inc. following their IPO on 1/18/18. In Asia, the world’s largest athletic shoe maker said it plans to purchase the retailer of Nike and Adidas. Whilst in Europe, demand continues for Fingerprint Cards as the company announces a profit warning for the fourth quarter.

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

Strong demand for ADT Inc. following their IPO on 1/18/18. ADT sold 105 million shares for $14 per share to raise $1.47 billion, which was less than the previously expected $17-19 target. Since the shares started trading on the NYSE the price has quickly declined to the $11.00 range. ADT is back on the New York Stock Exchange less than 19 months after it was taken private by Apollo Global Management LLC. Fundamental. Demand for ADT is strong as competition remains a forceful headwind that companies in the commercial security systems and services will have to contend with. Though ADT’s core residential market is growing steadily, multi-service operators pose a threat because they bundle security services with many other offerings. As we often see with IPOs there is uncertainty with regard to valuation and ADT has been no exception. We anticipate continued demand for ADT Inc. as concerns from bears appear unlikely to change in the near term.

Increased demand for medical device maker, Mazor Robotics Ltd. (MZOR), amid reports of insider trading. Since reaching a high of $64.59 back on Oct. 31st, the share price of MZOR has been volatile as the CEO, Ori Hadomi, is under investigation for insider trading related to Medtronic’s (MDT) investment in Mazor back in 2016. While the fundamentals of the company appear strong, MZOR recently said it anticipates record revenues for the quarter and full year amid strong system orders, shorts have been focused on the allegations of insider trading. According to Bloomberg, “in the fourth quarter of 2017, MZOR received purchase orders for 27 robotic guidance systems.” The article also pointed out that “this is the first full quarter since Medtronic assumed exclusive worldwide distribution of the Mazor X system for spine surgeries, as part of the second phase of the commercial agreement between the companies.” The Trading desk anticipates continued demand for MZOR as the company remains in the spotlight.

Asia Pacific

The world’s largest athletic shoe maker said it plans to purchase the retailer of Nike and Adidas. Chinese sportswear retailer Pou Sheng International Holdings has been offered to be made private by its largest shareholder Pou Chen Corp for HK$10.9 billion ($1.4 billion). Pou Sheng has been experiencing unprecedented challenges amid the rise of e-commerce, increased market competition and a rapid change in China’s retailing market. Pou Chen said it intends to restructure the company by investing heavily in the business and streamlining its operations, which it believes will make the business more sustainable in the future. We witnessed strong securities demand for shares of Pou Sheng last week which rallied by over 30% after the announcement of the news.

Renewed optimism for Singapore listed marine companies in 2018. Several analysts recently upgraded their forecasts for offshore and marine companies such as Keppel Corp, Sembcorp Marine and Sembcorp Industries in Singapore on a potential surge of new orders and expectations that oil prices will further rise this year. The positive outlook is being backed up by efforts of these firms to strengthen their balance sheets, reducing debt and selling off unprofitable businesses. We continue to see strong long-term securities demand for Sembcorp Marine whose shares have gained over 50% since February last year, ending a two-year slump. A rebound in oil prices has helped to boost earnings.

Europe

Demand continues for Fingerprint Cards. Prime Brokers continue to search for shares of the Swedish personal identity company, as it was one of the top five most sought after Euro stocks to borrow last week. It remains highly utilized at over 90%, and fees remain stable. With the company announcing a profit warning for fourth quarter, demand is expected to continue at this rate.

The stock buy-back for Altice NV has continued to drive demand for the Dutch Cable Service corporation. Shares have surged 2 Euros over the last two months, yet nowhere near the buyback prices seen in previous months. With Securities Lending utilization over 80% and fees continuing to rise, returns on lending Altice continue to be robust.