IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>Bain/<a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a>’s preconditional binding offer for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> is at JPY3,384, a 12.8% premium to EQT’s JPY3,000 offer. If KDDI provides an irrevocable, it is JPY3,500.</li>
<li>Bain/LY expect the Board to decide whether to recommend the proposal around mid-to-late July. The Bain/LY offer will automatically trigger a 10-day extension of the EQT offer.</li>
<li>The probability of a bidding war is low, as the Bain/LY offer represents an all-time high and EQT lacks a strong partner to support one. </li>
</ul>


Bain/LY (4689 JP)’s preconditional binding offer for Kakaku.com Inc (2371 JP) is at JPY3,384, a 12.8% premium to EQT’s JPY3,000 offer. If KDDI provides an irrevocable, it is JPY3,500.
Bain/LY expect the Board to decide whether to recommend the proposal around mid-to-late July. The Bain/LY offer will automatically trigger a 10-day extension of the EQT offer.
The probability of a bidding war is low, as the Bain/LY offer represents an all-time high and EQT lacks a strong partner to support one. 


Kakaku.com (2371 JP): Bain/LY’s Binding Offer May Get the Job Done

Telco/Internet specialist

Kirk Boodry

Redex Research

Thematic (Sector/Industry)

KDDI will announce industry-low pricing tomorrow with a new plan for 20GB/month data at ¥2,480/month, which is ¥500 cheaper (-17%) than plans announced by NTT DoCoMo and Softbank last month (and who will likely tweak their plans to match). For the industry overall, this clearly means modestly steeper erosion for mobile service revenue in FY21 and beyond but the good news is KDDI’s announcement should draw a line under regulatory-driven pricing pressure. It is worse news for newcomer Rakuten which has gone from a disruptive price leader in April last year to behind the curve nine months later. News this morning that a Rakuten Mobile network employee has been arrested for trade secret theft does not help.

KDDI will announce industry-low pricing tomorrow with a new plan for 20GB/month data at ¥2,480/month, which is ¥500 cheaper (-17%) than plans announced by NTT DoCoMo and Softbank last month (and who will likely tweak their plans to match). For the industry overall, this clearly means modestly steeper erosion for mobile service revenue in FY21 and beyond but the good news is KDDI’s announcement should draw a line under regulatory-driven pricing pressure. It is worse news for newcomer Rakuten which has gone from a disruptive price leader in April last year to behind the curve nine months later. News this morning that a Rakuten Mobile network employee has been arrested for trade secret theft does not help.

Japan Telecom Sector - KDDI Response to DoCoMo Pricing Increases the Pressure on Rakuten

Pan-Asia Tactical Market Calls (Quant-Driven), MRM Research

Nico Rosti

Pan-Asia Tactical Market Calls (Quant-Driven)

MRM Research

Quantitative Research

Equity Derivatives

<ul>
<li>While the bidding war for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a> goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).</li>
<li>In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.</li>
<li>We have to say upfront that the upside looks limited (unless the bidders formally structure binding offers above current market levels).</li>
</ul>


While the bidding war for Kakaku.com Inc (2371 JP) goes towards the showdown, the stock remains semi-paralized since early June (right when EQT and Bain/LY started to compete).
In this insight we want to evaluate the next possible trend direction and targets, using our quantitative forecast model.
We have to say upfront that the upside looks limited (unless the bidders formally structure binding offers above current market levels).


Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

Derivatives and Quantitative Strategist

Gaudenz Schneider

<ul>
<li>
What’s new: SoftBank Group (9984 JP) has pulled back from its 2 June high, losing 15.6% over ten days, while implied volatility remains elevated at 92%, in the 96th percentile.</li>
<li>
The opportunity: Elevated volatility creates unusually rich short-dated put premium, allowing investors to harvest income while potentially setting a lower entry point if the stock is assigned.</li>
<li>
Options angle: The setup shifts SoftBank from a pure post-pullback stock call to a tactical option-income opportunity, with strike selection framed around support levels, breakeven prices, and assignment risk.</li>
</ul>



What’s new: SoftBank Group (9984 JP) has pulled back from its 2 June high, losing 15.6% over ten days, while implied volatility remains elevated at 92%, in the 96th percentile.

The opportunity: Elevated volatility creates unusually rich short-dated put premium, allowing investors to harvest income while potentially setting a lower entry point if the stock is assigned.

Options angle: The setup shifts SoftBank from a pure post-pullback stock call to a tactical option-income opportunity, with strike selection framed around support levels, breakeven prices, and assignment risk.


SoftBank (9984 JP): Tactical Put Underwriting After Sharp Pullback

<ul>
<li>On 4 June, the <a href="https://www.nikkei.com/article/DGXZQOUC04CCA0U6A600C2000000/" target="_blank" rel="noopener">Nikkei reported</a> that <a href="https://www.smartkarma.com/entities/digital-garage-inc" target="_blank" data-smartkarma-citation="entities:13747:1" rel="noopener">Digital Garage (4819 JP)</a> will not accept Bain/<a href="https://www.smartkarma.com/entities/ly-corp" target="_blank" data-smartkarma-citation="entities:19603:1" rel="noopener">LY (4689 JP)</a>'s higher offer for <a href="https://www.smartkarma.com/entities/kakaku-com-inc" target="_blank" data-smartkarma-citation="entities:7408:1" rel="noopener">Kakaku.com Inc (2371 JP)</a>, as it is not feasible.</li>
<li>Digital Garage’s reasoning is not credible. The most likely reason is that, unlike the EQT offer, Bain/LY are not allowing reinvestment to take a 20% stake in the offeror.</li>
<li>While a setback, Bain/LY can succeed if it secures support from <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" data-smartkarma-citation="entities:639:1" rel="noopener">KDDI Corp (9433 JP)</a> and Oasis. Irrespective of Digital Garage’s stance, EQT will likely need to bump to succeed.</li>
</ul>


On 4 June, the Nikkei reported that Digital Garage (4819 JP) will not accept Bain/LY (4689 JP)'s higher offer for Kakaku.com Inc (2371 JP), as it is not feasible.
Digital Garage’s reasoning is not credible. The most likely reason is that, unlike the EQT offer, Bain/LY are not allowing reinvestment to take a 20% stake in the offeror.
While a setback, Bain/LY can succeed if it secures support from KDDI Corp (9433 JP) and Oasis. Irrespective of Digital Garage’s stance, EQT will likely need to bump to succeed.


Kakaku.com (2371 JP): Digital Garage Moves to Thwart Bain/LY

Japan

KDDI CORPORATION provides mobile communication services and sells mobile devices.  The Company also is a broadband provider.

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KDDI Corp (9433 JP)

Kakaku.com (2371 JP): Bain/LY’s Binding Offer May Get the Job Done

The probability of a bidding war is low, as the Bain/LY offer represents an all-time high and EQT lacks a strong partner to support one.

Arun George

Japan Telecom Sector - KDDI Response to DoCoMo Pricing Increases the Pressure on Rakuten

New data pricing from KDDI undercuts NTT/Softbank, which is bad for FY21 sales but eases regulatory worries. It is definitely bad news for Rakuten...

Kirk Boodry

Kakaku.com (2371 JP) Tactical Outlook Ahead of Bain/LY Counter-Offer: Pop or Drop?

The bidding war for Kakaku.com has left the price stagnant since June. We see limited short-term upside (unless the bidders increase their offers)....

Nico Rosti

SoftBank (9984 JP): Tactical Put Underwriting After Sharp Pullback

SoftBank’s pullback and elevated implied volatility create a tactical put-underwriting setup, offering short-dated premium income with strike...

Gaudenz Schneider

Kakaku.com (2371 JP): Digital Garage Moves to Thwart Bain/LY

The Nikkei reports that Bain/LY’s binding offer is around JPY3,500, a 16.7% premium to EQT’s JPY3,000 offer and a 3.2% premium to the last close....

Arun George

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