Stable Investor Sentiment Towards Dutch Companies

We are off to Amsterdam next week (http://www.dataexplorers.com/events/forum/amsterdam) where we are hosting a securities lending breakfast and it is interesting to see how consistent the Dutch securities lending market has been over the past few years. We will look at that as well as some of the special situations going on there including Crucell NV (AMS: CRXL), Tom Tom NV (AMS:TOM2), BinckBank NV (AMS: BINCK), BAM Groep (AMS: BAMNB) and Agfa (EBR:AGFB) in neighboring Belgium.

The Dutch equity market is currently number five in Europe in terms of both the balance on loan and the return (in bps and in terms of cash) being generated for those funds who lend. This may be slightly flattering at present since the upcoming dividend being paid by Royal Dutch Shell (AMS: RDSA) will be influencing the numbers singlehandedly. In contrast, Belgium is one of the least lucrative securities lending markets. 96% of the income from lending is generated from the lending fee at present but is hasn’t always been like this with cash reinvestment returns featuring prominently pre and post the credit crisis.

When compared to European equities overall, we see that demand for Dutch equities is stronger according to our Long Short Ratio. In 2008 and 2009 they had very similar demand profiles but this has diverged with supply outweighing demand by 7 times for Netherlands equities compared to 9 times for the whole of Europe.

Crucell NV (AMS: CRXL) is an interesting name at present. America’s Johnson & Johnson (NYSE:JNJ) made a bid for this vaccine biopharmaceutical company in mid September. It is interesting because there has been a large recent increase in the demand to borrow this name from 1% of the company to almost 5%. There has been a spike in the outright traded volume at the same time. Given reports in the Dutch press (Het Financieele Dagblad on the 20th Oct) that 10% of shareholders are opposed to JNJ’s offer, could funds be speculating that the deal will not go ahead? Below forecast recent earnings could also be the catalyst.

Our data shows that funds who lend CRXL have been reducing their shareholding and now own 5.9% of issued shares. 95% of shareholders need to offer their shares for the Johnson & Johnson’s 24.75 Euro per share offer to be successful according to M&A experts dealReporter.

Elsewhere, there is sporadic demand for Dutch names such as online banking provider BinckBank NV (AMS: BINCK) (1% on loan) and construction firm BAM Groep (AMS: BAMNB) which sees 2.5% of the company being borrowed. It was almost 15% back in May.

The recent private placement of new shares in Belgium’s Agfa-Gevaert (EBR:AGFB) could be the reason that borrowing has risen sharply from 4% to 15% of the shares outstanding. It is interesting to see that UBS owns 3.66% according to Reuters, with 0.11% being held by bottom up long short hedge fund UBS O’Connor.

Tom Tom NV (AMS:TOM2) is another popular name that we covered last week in our Sat Nav review. The percentage of shares outstanding on loan stands at 10% and it is worth noting that that the stock is heavily utilized, with over 70% of the lendable supply currently out on loan.

Finally, we are jointly hosting a discussion about short selling at Bloomberg in London this Wednesday. I hope to see you there. Please visit http://www.bloomberg.com/promo/Oct/41044206/ to register.