Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

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

Event-Driven

<p>The KOSDAQ 150 has no Fast Entry rule for IPO stocks.</p><p>However, it has the rule to include the stocks not meeting the minimum listing period of 6 months at a regular bi-annual rebalancing if the following condition is satisfied.</p><div class="content-highlight"><p><strong>A stock is in the top 50 ordinary stocks on KOSDAQ by full market capitalization.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/350/original/Screen+Shot+2021-11-08+at+4.43.27+AM.png?1636364839" class="editor-image img-responsive" data-smartkarma-image-id="240350"></figure></section><div class="content-caption">(Source: KOSDAQ 150 Methodology)</div><p>So what is the calculation period? It is simple. The KRX uses the average daily market capitalization for 15 trading days from the screening base date. The screening base date for this December regular rebalancing is October 31.</p><div class="content-highlight"><p><strong>So the 15 trading day review period is from October 8 to October 29.</strong></p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/240/352/original/Screen+Shot+2021-11-08+at+4.43.54+AM.png?1636364975" class="editor-image img-responsive" data-smartkarma-image-id="240352"></figure></section><div class="content-caption">(Source: KOSDAQ 150 Methodology)</div>

The KOSDAQ 150 has no Fast Entry rule for IPO stocks.However, it has the rule to include the stocks not meeting the minimum listing period of 6 months at a regular bi-annual rebalancing if the following condition is satisfied.A stock is in the top 50 ordinary stocks on KOSDAQ by full market capitalization.(Source: KOSDAQ 150 Methodology)So what is the calculation period? It is simple. The KRX uses the average daily market capitalization for 15 trading days from the screening base date. The screening base date for this December regular rebalancing is October 31.So the 15 trading day review period is from October 8 to October 29.(Source: KOSDAQ 150 Methodology)

KOSDAQ 150 Exceptional Addition of Large-Scale Stocks: Ecopro HN & HK Inno.N

Equity Capital Markets


Final Allocations

HK Inno.N's allocation results are now available at DART.
Here is the link to the allocation results at DART.
Institutional investors again took 55% of the total offering, retail took 25%, and the ESOP has fully subscribed to the 20% allocation.

We can find quite interesting outcomes from the institutional allocations. Most of the local hedge funds, which accounted for 25% of the subscription applications, were excluded from the final allocation. 
On the other hand, it is safe to say that local publicly-raised funds with long-term holding tendencies took all the institutional allocations.
Another interesting point here is that local pensions, which also have long-term holding tendencies, received almost no allocation. 
This will be discussed in more detail later, but the direct cause must be the low number of lockup applications. If so, it proves that there must have been virtually no pension funds participating in this bookbuilding among institutional investors in the category to which the local pensions belong.
That is, proprietary asset managers with relatively short-term holding tendencies, which are grouped in the same category as the local pensions, must have constituted the majority. Since HK Inno.N is a stock listing on the KOSDAQ, it seems that major pension funds such as the National Pension Service did not participate.












By investor type
Holding tendencies
Applications
Allocated, % of the offering


Local publicly raised funds
Long-term
46.05%
75.74%


Local brokerages/investment advisories
Short-term
1.94%
0.16%


Local pensions, funds managing proprietary assets, banks, and insurance companies
Long-term (pensions ) &amp; short-term (proprietary asset managers)
13.78%
1.04%


Local others (mostly discretionary investment companies - local hedge funds))
Mainly, short-term
25.72%
1.23%


Foreign (foreign IPO funds &amp; hedge funds)
Depends
0.76%
21.82%


Foreign others (mostly local hot money)
Short-term
11.75%
0.01%

Source: DART


Below is the final quantity allocated to each institution type, local retail investors, and the ESOP.









Allocation by type
Allocated, % of the offering
Final, % of the offering
Final, % of post-IPO SO


Institutional
55.00%
55.00%
19.25%


1. Local publicly raised funds
-
41.66%
14.58%


2. Local Br/IA
-
0.09%
0.03%


3. Local pension, etc.
-
0.57%
0.20%


4. Local others
-
0.68%
0.24%


5. Foreign
-
12.00%
4.20%


6. Foreign, other
-
0.00%
0.00%


Retail
25.00%
25.00%
8.75%


ESOP
20.00%
20.00%
7.00%


Total
100.00%
100.00%
35.00%

Source: DART



Lockups
The final lockup rate is 26.60%. Considering that the lockup application rate was 13% in the first place, it can be seen that the proportion of lockup was increased as much as possible. This is why local publicly-raised funds took 75% of all institutional allocations. Even in allocations to foreign institutions, the issuer's efforts to allocate to long-only funds as much as possible can be detected as suggested in the Foreign - Other allocation results. 













Lock-up, by orders
1. Local PO
2. Local Br/IA
3. Local pension, etc.
4. Local others
5. Foreign
6. Foreign, other
Total


6 months
16.70%
0.00%
0.08%
0.03%
0.00%
0.01%
16.81%


3 months
3.56%
0.00%
0.03%
0.08%
0.00%
0.00%
3.67%


1 month
5.65%
0.02%
0.06%
0.05%
0.00%
0.00%
5.78%


15 days
0.26%
0.00%
0.05%
0.02%
0.00%
0.00%
0.34%


No lockup
49.57%
0.14%
0.83%
1.05%
21.82%
0.00%
73.40%


Total
75.74%
0.16%
1.04%
1.23%
21.82%
0.01%
100.00%

Source: DART



Hence, the amount released to the market immediately after the listing is 22.88% of the outstanding shares.










Post-IPO lockup releases, as a % of SO
IPO shareholders
Major shareholder
Pre-IPO minority shareholders
Total


2 years
0.00%
49.16%
0.00%
49.16%


1 year
0.00%
0.00%
0.00%
0.00%


6 months
3.24%
0.00%
22.84%
26.08%


3 months
0.71%
0.00%
0.00%
0.71%


1 month
1.11%
0.00%
0.00%
1.11%


15 days
0.07%
0.00%
0.00%
0.07%


No lock-up
22.88%
-
-
22.88%

Source: DART




HK Inno.N Post-Listing Immediate Float Analysis

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>HK Inno.N announced its IPO book building results today. The IPO price has been determined at 59,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was 1,871 to 1.</p><p>There were 13.5% of shares that were applied under a lock-up. This is relatively low and is one of the concerning factors of the bookbuilding results.</p><div class="content-highlight"><p>We continue to have a POSITIVE view of the HK Inno.N IPO post book building results. Our base case valuation of HK Inno.N remains implied market cap of 2.2  trillion won or implied price of 75,534 won per share. This represents 28% higher than the high end of the IPO price range of 59,000 won. </p></div>

HK Inno.N announced its IPO book building results today. The IPO price has been determined at 59,000 won, which was at the high end of the IPO price range. The demand ratio among the institutional investors was 1,871 to 1.There were 13.5% of shares that were applied under a lock-up. This is relatively low and is one of the concerning factors of the bookbuilding results.We continue to have a POSITIVE view of the HK Inno.N IPO post book building results. Our base case valuation of HK Inno.N remains implied market cap of 2.2  trillion won or implied price of 75,534 won per share. This represents 28% higher than the high end of the IPO price range of 59,000 won. 

HK Inno.N's offering price got fixed at ₩59,000, the upper end of the indicative price band, implying a market cap of ₩1.7T. There is no change in the offering volume.







Indicative price band
Low
High (final)


Price
₩50,000
₩59,000


Base deal size
₩505.9B
₩596.9B


- Institutional allotment
₩278.2B
₩328.3B


Implied market cap
₩1,445.2B
₩1,705.4B


- Discount
29.54%
16.85%


EV/EBITDA
15.77x
18.02x

Source: DART

The institutional subscription competition rate is 1,871 to 1, nearly hitting the record holder SKIET's 1,883 to 1. In this bookbuilding, it seems that local institutions have been overbetting quite aggressively. In particular, it seems that local publicly raised funds with long-term holding tendencies have been active in securing the stocks. This proves that many local institutional investors felt that this IPO was price attractive enough for long-term holding.









By investor type
Institution
%
Demand
%


Local publicly raised funds
713
43.82%
4,795,649,600
46.05%


Local brokerages/investment advisories
31
1.91%
202,086,750
1.94%


Local pensions, funds managing proprietary assets, banks, and insurance companies
220
13.52%
1,434,513,850
13.78%


Local others (mostly discretionary investment companies - local hedge funds))
392
24.09%
2,678,313,000
25.72%


Foreign (foreign IPO funds &amp; hedge funds)
74
4.55%
79,187,194
0.76%


Foreign others (mostly local hot money)
197
12.11%
1,223,144,000
11.75%


Total
1,627
100.00%
10,412,894,394
100.00%


Subscription rate
1,871.36

Source: DART

The "Unspecified" category usually indicates that they want the shares above the high end.With that in mind, about one-third have gone for the upper end or above. The remaining two-thirds selected 75-100% of the upper end. All of the orders are priced at 75-100% of the upper end or higher. So, yes, we can say the institutional pricing is quite aggressive.









By price
Institution
%
Demand
%


Above high end
536
32.94%
3,597,972,500
34.55%


75-100% of high end
1,061
65.21%
6,630,326,894
63.67%


50-75% of high end
0
0.00%
0
0.00%


25-50% of high end
0
0.00%
0
0.00%


0-25% of high end
0
0.00%
0
0.00%


Median
0
0.00%
0
0.00%


75-100% of median
0
0.00%
0
0.00%


50-75% of median
0
0.00%
0
0.00%


25-50% of median
0
0.00%
0
0.00%


0-25% of median
0
0.00%
0
0.00%


Low end or below
0
0.00%
0
0.00%


Unspecified
30
1.84%
184,595,000
1.77%


Total
1,627
100.00%
10,412,894,394
100.00%

Source: DART



HK Inno.N Bookbuilding Results: Subscription/Lockup Orders in Detail

<h2>Listing date</h2><p>The listing date of Krafton has been confirmed as August 10th.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Schedule"}'>Krafton IPO schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book open"}'>Book open</td>
<td data-sheets-value='{"1":3,"3":44391}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 14</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Book close"}'>Book close</td>
<td data-sheets-value='{"1":3,"3":44404}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Allotment"}'>Allotment</td>
<td data-sheets-value='{"1":3,"3":44406}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 7. 29</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription"}'>Subscription</td>
<td data-sheets-value='{"1":3,"3":44410}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td data-sheets-value='{"1":3,"3":44413}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 8. 5</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Listing</strong></td>
<td data-sheets-value='{"1":3,"3":44418}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'><strong>2021. 8. 10</strong></td>
</tr>
<tr>
<td><em><strong> - Kakao Bank's listing</strong></em></td>
<td><em><strong>2021. 8. 5</strong></em></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><ul>
<li><strong>The initially scheduled date was August 10th. However, as Kakao Pay's listing date was set for August 12, Krafton could not easily finalize the listing date due to the issue of mutual interference for retail investors with Kakao Pay.</strong></li>
<li><strong>The fact that Krafton confirmed the listing date as soon as Kakao Pay's listing schedule was delayed shows how sensitive Krafton was to this retail interference issue.</strong></li>
</ul><div class="content-highlight">
<p>The listing date of Kakao Bank is August 5, and there is a gap of 3 business days until the listing date of Krafton. However, in this case, Krafton is in a position to absorb retail demand from Kakao Bank. More importantly, Kakao Bank must draw less attention from retail investors than Kakao Pay in terms of business nature, so there is no need to worry too much about potential interference with Kakao Bank.</p>
<p><strong>And then, at least until the end of August, there is no major listing. That is, there is enough temporal buffer for Krafton to drive retail demand.</strong></p>
</div>

Listing dateThe listing date of Krafton has been confirmed as August 10th.





Krafton IPO schedule

Book open
2021. 7. 14


Book close
2021. 7. 27


Allotment
2021. 7. 29


Subscription
2021. 8. 2


Payment
2021. 8. 5


Listing
2021. 8. 10


 - Kakao Bank's listing
2021. 8. 5

Source: DART


The initially scheduled date was August 10th. However, as Kakao Pay's listing date was set for August 12, Krafton could not easily finalize the listing date due to the issue of mutual interference for retail investors with Kakao Pay.
The fact that Krafton confirmed the listing date as soon as Kakao Pay's listing schedule was delayed shows how sensitive Krafton was to this retail interference issue.

The listing date of Kakao Bank is August 5, and there is a gap of 3 business days until the listing date of Krafton. However, in this case, Krafton is in a position to absorb retail demand from Kakao Bank. More importantly, Kakao Bank must draw less attention from retail investors than Kakao Pay in terms of business nature, so there is no need to worry too much about potential interference with Kakao Bank.
And then, at least until the end of August, there is no major listing. That is, there is enough temporal buffer for Krafton to drive retail demand.


Krafton Listing Date Confirmed as August 10th: Rebalancing Trading Timeline

South Korea

HK inno.N Corp. develops and manufactures pharmaceuticals products. The Company develops and sells immune anticancer drugs, blood disease drugs, kidney disease drugs, and other products. HK inno.N conducts businesses across worldwide.

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HK inno.N (195940 KS)

KOSDAQ 150 Exceptional Addition of Large-Scale Stocks: Ecopro HN & HK Inno.N

This post examines the possibilities of Ecopro HN and HK inno.N's inclusion in the KOSDAQ 150 through the special entry rule in the upcoming...

Sanghyun Park

HK Inno.N Post-Listing Immediate Float Analysis

The real-world float is in the low 20%, which is purely made up of new investors who flowed in through the IPO. This is a fairly neat float...

Sanghyun Park

HK Inno.N Book Building Results Analysis

The IPO price of HK Inno.N has been determined at 59,000 won (high end of the IPO price range). The demand ratio among the institutional investors...

Douglas Kim

HK Inno.N Bookbuilding Results: Subscription/Lockup Orders in Detail

HK Inno.N's bookbuilding results are out at DART. This post details the subscription and lockup orders by each investor type.

Sanghyun Park

Krafton Listing Date Confirmed as August 10th: Rebalancing Trading Timeline

The listing date of Krafton has been confirmed as August 10th. So, this post examines the index rebalancing trading timeline.

Sanghyun Park

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