Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>Dongwon Industries’ float rate is less than 10% (1 - 63.15% - 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.</li>
<li>The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.</li>
<li>Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.</li>
</ul>


Dongwon Industries’ float rate is less than 10% (1 - 63.15% - 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.


Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

Index Rebalance

<ul>
<li>Names with a significant impact: <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT (030200)</a>, <a href="https://www.smartkarma.com/entities/shinhan-financial-group-ltd" target="_blank" data-smartkarma-citation="entities:6978:1" rel="noopener">Shinhan Financial (055550)</a>, <a href="https://www.smartkarma.com/entities/korean-air-lines-co-ltd" target="_blank" data-smartkarma-citation="entities:11048:1" rel="noopener">Korean Air (003490)</a>, <a href="https://www.smartkarma.com/entities/lg-energy-solution" target="_blank" data-smartkarma-citation="entities:33464:1" rel="noopener">LG Energy (373220)</a>, <a href="https://www.smartkarma.com/entities/dongwon-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:1783:1" rel="noopener">Dongwon Industries (006040)</a>, <a href="https://www.smartkarma.com/entities/lotte-fine-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:507:1" rel="noopener">Lotte Fine Chemical (004000)</a>, <a href="https://www.smartkarma.com/entities/meritz-fire-marine-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:20468:1" rel="noopener">Meritz Fire (000060)</a>, &amp; <a href="https://www.smartkarma.com/entities/mirae-asset-daewoo-co-ltd-b50c4d95-1687-46cb-9b58-f79ce0e72670" target="_blank" data-smartkarma-citation="entities:12061:1" rel="noopener">Mirae Asset (006800)</a> </li>
<li>Limiting the target size of our flow trading to only the fund size that directly mirrors it (₩17.8T) on T-1 Effective will increase our winning rate.</li>
<li>Lately, local pensions have been seen as rather taking advantage of flow trading in index rebalancing events, so I also recommend keeping the trading window fairly tight.</li>
</ul>


Names with a significant impact: KT (030200), Shinhan Financial (055550), Korean Air (003490), LG Energy (373220), Dongwon Industries (006040), Lotte Fine Chemical (004000), Meritz Fire (000060), &amp; Mirae Asset (006800) 
Limiting the target size of our flow trading to only the fund size that directly mirrors it (₩17.8T) on T-1 Effective will increase our winning rate.
Lately, local pensions have been seen as rather taking advantage of flow trading in index rebalancing events, so I also recommend keeping the trading window fairly tight.


KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective

<ul>
<li>Value accretion by unlocking the voting eligibility of treasury shares won't happen as the company holds no treasury share.</li>
<li>But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE's selling outflow will be about 700-800K shares, 1.6x ADTV.</li>
<li>Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.</li>
</ul>


Value accretion by unlocking the voting eligibility of treasury shares won't happen as the company holds no treasury share.
But KOSPI 200 passive flows will pose a noteworthy trading point. PASSIVE's selling outflow will be about 700-800K shares, 1.6x ADTV.
Market cap imbalance, primarily driven by the tender offer dynamic and the split ratio that is excessively focused on Holdco, will likely exacerbate Holdco → Opco migration after re-listing.


Trading Considerations on the OCI Demerger

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>In a surprising move, Dongwon Industries announced that it will listen to the demands of the minority shareholders and change the merger ratio with Dongwon Enterprise.</li>
<li>This is likely to have a positive impact on Dongwon Industries since it boosts the value of Dongwon Industries' minority shareholders at the expense of controlling shareholders of Dongwon Enterprise.</li>
<li>The merger price of Dongwon Industries will be raised from 248,961 won to 384,140 won (reflecting net asset value). The merger ratio will be adjusted from 1:3.8385530 to 1:2.7023475.</li>
</ul>


In a surprising move, Dongwon Industries announced that it will listen to the demands of the minority shareholders and change the merger ratio with Dongwon Enterprise.
This is likely to have a positive impact on Dongwon Industries since it boosts the value of Dongwon Industries' minority shareholders at the expense of controlling shareholders of Dongwon Enterprise.
The merger price of Dongwon Industries will be raised from 248,961 won to 384,140 won (reflecting net asset value). The merger ratio will be adjusted from 1:3.8385530 to 1:2.7023475.


Dongwon Industries Listens to Minority Shareholders and Changes Merger Ratio with Dongwon Enterprise

<ul>
<li>Dongwon Industries merger will welcome 44.88M new shares, bumping up the total issued shares by 2.5 times.</li>
<li>So, we will likely see a passive inflow of 0.39x ADTV at the close on October 20, a level certainly worth our attention for flow trading.</li>
<li>However, a short position approach to betting on this possibility is expected to face quite a tight journey.</li>
</ul>


Dongwon Industries merger will welcome 44.88M new shares, bumping up the total issued shares by 2.5 times.
So, we will likely see a passive inflow of 0.39x ADTV at the close on October 20, a level certainly worth our attention for flow trading.
However, a short position approach to betting on this possibility is expected to face quite a tight journey.


Dongwon Industries Merger: KOSPI 200 Flow Trading & Shorting Prospects on Cancellation

South Korea

Dongwon Industries Co., Ltd. is a deep-sea fishing company.  The Company produces and distributes fish can goods and processed seafood products including tuna sashimi.

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Dongwon Industries (006040 KS)

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

This post presents the shorting opportunity on Dongwon Industries, which will likely be deleted in the KOSPI 200 June review, as its free-float...

Sanghyun Park

KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective

This post details the official results of the KOSPI 200 up/down weights and examines the passive impacts on T-1 Effective, which is December 8.

Sanghyun Park

Trading Considerations on the OCI Demerger

This post details the OCI demerger structure and discusses trading considerations, primarily targeting the KOSPI 200 passive flows.

Sanghyun Park

Dongwon Industries Listens to Minority Shareholders and Changes Merger Ratio with Dongwon Enterprise

In a surprising move, Dongwon Industries announced that it will listen to the demands of the minority shareholders and change the merger ratio with...

Douglas Kim

Dongwon Industries Merger: KOSPI 200 Flow Trading & Shorting Prospects on Cancellation

This post summarizes the Dongwon Industries merger deal and investigates the flow trading of the KOSPI 200 corporate event implementation. Also, it...

Sanghyun Park

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