Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In February 2017, when the accounting and loss scandal surrounding <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> was just taking shape, I published <a href="https://www.smartkarma.com/insights/toshiba-possible-demotion-to-tse2-the-mechanics-impact" target="_blank" data-smartkarma-citation="insights:8838" rel="noopener">Toshiba: Possible Demotion to TSE2? The Mechanics &amp; Impact</a> based on the fact that the loss envisaged would take Toshiba's shareholder equity below zero at the photo some 40 days later. That meant demotion to the TSE2, but it wasn't on people's minds yet so was not worth shorting until people got less excited about a bounce (when the real facts about the losses and its implications became clearer. THEN it would be worth a short, because the dip-buyers would have bought the dip, then the passive funds would have to sell, and new dip buyers would have to show up. So in June we got the news, as expected, and covered in <a href="https://www.smartkarma.com/insights/toshiba-demotion-from-tse1-to-tse2-topix-exclusion-jul31-close" target="_blank" data-smartkarma-citation="insights:11664" rel="noopener">Toshiba Demotion from TSE1 to TSE2; TOPIX Exclusion Jul31 Close</a>, and the stock fell.  Later that year, after the company successfully fought to retain its listing in late summer, it made an equity placement of ¥600bn in late November 2017 with promises of eventual shareholder return after it had sold its Toshiba Memory business. They avoided delisting through this capital raise, but hopes for an early return to TOPIX as had been the case with <a href="https://www.smartkarma.com/entities/sharp-corp" target="_blank" data-smartkarma-citation="entities:391:1" rel="noopener">Sharp Corp (6753 JP)</a> (which only spent a year in purgatory), were dashed when investors figured out (covered in <a href="https://www.smartkarma.com/insights/toshiba-and-topix-it-s-gonna-be-a-long-wait" target="_blank" data-smartkarma-citation="insights:16853" rel="noopener">TOSHIBA and TOPIX - It's Gonna Be a Long Wait.</a>) that TSE Listing Regulations had clauses which meant companies which had received Opinion Withheld on their accounting statements were ineligible for TSE1 listing until five years afterwards. Noises surfaced later that spring and summer so I wrote <a href="https://www.smartkarma.com/insights/toshiba-a-possible-route-to-early-tse1-topix-inclusion" target="_blank" data-smartkarma-citation="insights:21544" rel="noopener">Toshiba:  A Possible Route to Early TSE1/TOPIX Inclusion?</a> discussing possible loopholes which could allow an earlier return than spring 2022. My conclusion then was "It is tougher than it looks, but there are other reasons one should own."Fast forward a couple of years past a revival plan, ¥700bn of buybacks, and buy-ins of subsidiaries, in November 2019 the TSE decided, as it was starting its cash equity market structure review designed to raise standards for blue chips to gain more international goodwill on governance, to lower the standards of TSE1 promotion to those of TSE2. That was changed to allow the TSE to admit Toshiba back to TOPIX early, discussed in <a href="https://www.smartkarma.com/insights/nikkei-tse-rule-change-to-allow-toshiba-an-early-return-to-topix" target="_blank" data-smartkarma-citation="insights:34839" rel="noopener">[Nikkei] TSE Rule Change to Allow Toshiba An Early Return to TOPIX</a>.Toshiba announced five months later in April 2020 it had applied for a return to TSE1, discussed in <a href="https://www.smartkarma.com/insights/toshiba-return-to-topix-timing-and-size" target="_blank" data-smartkarma-citation="insights:38189" rel="noopener">Toshiba Return to TOPIX? Timing and Size</a> and after 4+ months had passed I looked at the ongoing issues of inclusion in <a href="https://www.smartkarma.com/insights/toshiba-topix-inclusion-jack-be-nimble-jack-be-quick" target="_blank" data-smartkarma-citation="insights:42235" rel="noopener">Toshiba TOPIX Inclusion - Jack Be Nimble, Jack Be Quick...</a> (I was not bullish then price-wise, though after the price fell I became positive again).  Regular Smartkarma readers who want to see the whole series on Toshiba going back four years can look <a href="https://www.smartkarma.com/profiles/travis-lundy/insights?fulltext=Toshiba" target="_blank" rel="noopener">here</a>.<h3>The NEW News</h3>The NEW News is that on Friday the TSE announced that Toshiba would be reassigned to the TSE1 on 29 January. According to TOPIX Index Methodology (<a href="https://www.jpx.co.jp/english/markets/indices/topix/tvdivq00000030ne-att/e_cal_3_topix.pdf" target="_blank" rel="noopener">25 Dec 2020 version</a>), this means it will be included in TOPIX as of the last trading day of February, which means the index inclusion event is at the close of 25 February 2021. Toshiba itself made a flowery <a href="http://www.toshiba.co.jp/about/ir/en/news/20210122_1.pdf" target="_blank" rel="noopener">announcement</a> full of words about the seriousness of its governance and compliance.Long-suffering activists may rejoice. This creates liquidity for a partial exit.The shares are up roughly 20% since the TOPIX Deletion on 31 July 2017. The shares are up about 10% from the placement in late November 2017 raising capital. This hasn't been the best of trades, but my relatively constant refrain has been to feed the ducks when they are quacking (my most recent insight on Toshiba was <a href="https://www.smartkarma.com/insights/toshiba-is-a-range-trade-still" target="_blank" data-smartkarma-citation="insights:43366" rel="noopener">Toshiba Is A Range Trade. Still.</a> four+ months ago and on that day, shares closed at ¥2,959. Today they closed at ¥2,963. But a TOPIX Inclusion of this size is a rare species, and one of this anticipation is practically mythological. So we're going to talk about it.I have a personal favourite mythological creature from Japanese folklore (originally, I believe, derived from Chinese traditions). It's called a Baku (<a href="https://ja.wikipedia.org/wiki/%E7%8D%8F" target="_blank" data-ved="2ahUKEwji-KzBqq_uAhUSGKYKHa2oBuUQFjAAegQIAhAC" rel="noopener"></a>獏) and it looks a bit like a cross between a lion and an elephant, and visitors to temples have undoubtedly seen them before.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/086/original/baku+asada-ji+Matsusaka+City+Soga+Shohaku.jpg?1611312861" class="editor-image img-responsive" data-smartkarma-image-id="184086"></figure><div class="content-caption">Baku, Door Painting by Soga Shohaku, Asada-ji (Matsusaka City)</div></section>This creature is perhaps an apt metaphor for the TOPIX Inclusion as far as activists and event traders are concerned.Those who want to know why should read on...

In February 2017, when the accounting and loss scandal surrounding Toshiba Corp (6502 JP) was just taking shape, I published Toshiba: Possible Demotion to TSE2? The Mechanics &amp; Impact based on the fact that the loss envisaged would take Toshiba's shareholder equity below zero at the photo some 40 days later. That meant demotion to the TSE2, but it wasn't on people's minds yet so was not worth shorting until people got less excited about a bounce (when the real facts about the losses and its implications became clearer. THEN it would be worth a short, because the dip-buyers would have bought the dip, then the passive funds would have to sell, and new dip buyers would have to show up. So in June we got the news, as expected, and covered in Toshiba Demotion from TSE1 to TSE2; TOPIX Exclusion Jul31 Close, and the stock fell.  Later that year, after the company successfully fought to retain its listing in late summer, it made an equity placement of ¥600bn in late November 2017 with promises of eventual shareholder return after it had sold its Toshiba Memory business. They avoided delisting through this capital raise, but hopes for an early return to TOPIX as had been the case with Sharp Corp (6753 JP) (which only spent a year in purgatory), were dashed when investors figured out (covered in TOSHIBA and TOPIX - It's Gonna Be a Long Wait.) that TSE Listing Regulations had clauses which meant companies which had received Opinion Withheld on their accounting statements were ineligible for TSE1 listing until five years afterwards. Noises surfaced later that spring and summer so I wrote Toshiba:  A Possible Route to Early TSE1/TOPIX Inclusion? discussing possible loopholes which could allow an earlier return than spring 2022. My conclusion then was "It is tougher than it looks, but there are other reasons one should own."Fast forward a couple of years past a revival plan, ¥700bn of buybacks, and buy-ins of subsidiaries, in November 2019 the TSE decided, as it was starting its cash equity market structure review designed to raise standards for blue chips to gain more international goodwill on governance, to lower the standards of TSE1 promotion to those of TSE2. That was changed to allow the TSE to admit Toshiba back to TOPIX early, discussed in [Nikkei] TSE Rule Change to Allow Toshiba An Early Return to TOPIX.Toshiba announced five months later in April 2020 it had applied for a return to TSE1, discussed in Toshiba Return to TOPIX? Timing and Size and after 4+ months had passed I looked at the ongoing issues of inclusion in Toshiba TOPIX Inclusion - Jack Be Nimble, Jack Be Quick... (I was not bullish then price-wise, though after the price fell I became positive again).  Regular Smartkarma readers who want to see the whole series on Toshiba going back four years can look here.The NEW NewsThe NEW News is that on Friday the TSE announced that Toshiba would be reassigned to the TSE1 on 29 January. According to TOPIX Index Methodology (25 Dec 2020 version), this means it will be included in TOPIX as of the last trading day of February, which means the index inclusion event is at the close of 25 February 2021. Toshiba itself made a flowery announcement full of words about the seriousness of its governance and compliance.Long-suffering activists may rejoice. This creates liquidity for a partial exit.The shares are up roughly 20% since the TOPIX Deletion on 31 July 2017. The shares are up about 10% from the placement in late November 2017 raising capital. This hasn't been the best of trades, but my relatively constant refrain has been to feed the ducks when they are quacking (my most recent insight on Toshiba was Toshiba Is A Range Trade. Still. four+ months ago and on that day, shares closed at ¥2,959. Today they closed at ¥2,963. But a TOPIX Inclusion of this size is a rare species, and one of this anticipation is practically mythological. So we're going to talk about it.I have a personal favourite mythological creature from Japanese folklore (originally, I believe, derived from Chinese traditions). It's called a Baku (獏) and it looks a bit like a cross between a lion and an elephant, and visitors to temples have undoubtedly seen them before.Baku, Door Painting by Soga Shohaku, Asada-ji (Matsusaka City)This creature is perhaps an apt metaphor for the TOPIX Inclusion as far as activists and event traders are concerned.Those who want to know why should read on...

Toshiba Finally Gets Into TOPIX but Beware the Baku  (It's Complicated)

President

Thomas Coughlin

Coughlin Associates

Equity Bottom-Up

Marvell’s Analyst Day presentations showed the company’s commitment to storage management and networking.  Their semiconductor products enable customized SSDs, universal NVMe over Fabric connectivity, including with HDDs, and enable DPU accelerator-based solutions for storage management from autonomous automobiles and IOT applications to data centers.

Marvell’s Analyst Day presentations showed the company’s commitment to storage management and networking.  Their semiconductor products enable customized SSDs, universal NVMe over Fabric connectivity, including with HDDs, and enable DPU accelerator-based solutions for storage management from autonomous automobiles and IOT applications to data centers.

Marvell Technologies Advances: Positive for Company’s Future

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Slowly the details have emerged about the SK hynix acquisition of Intel's NAND flash business, which is the bulk of Intel's Nonvolatile Systems Group (NSG).  This Smartkarma Insight shares recent details and explains why some may have been ill-conceived.

Slowly the details have emerged about the SK hynix acquisition of Intel's NAND flash business, which is the bulk of Intel's Nonvolatile Systems Group (NSG).  This Smartkarma Insight shares recent details and explains why some may have been ill-conceived.

Details of SK Hynix Acquisition of Intel Flash Business

Micron has just upgraded its outlook for the current quarter from non-GAAP revenues of $5.0-$5.4 billion to revenues of $5.7-$5.75 billion.  This increase has been due to unanticipated end-demand strength that should benefit all DRAM and NAND flash makers.

Micron has just upgraded its outlook for the current quarter from non-GAAP revenues of $5.0-$5.4 billion to revenues of $5.7-$5.75 billion.  This increase has been due to unanticipated end-demand strength that should benefit all DRAM and NAND flash makers.

Recent Kioxia developments, and in particular, the development of its Ethernet native SSDs for a EBOF and the KumoScale block, file and object storage container storage are innovations that could drive additional value for the company and help in getting a better price in a future IPO, when the overall NAND flash industry is in a more profitable part of its cycle.

Recent Kioxia developments, and in particular, the development of its Ethernet native SSDs for a EBOF and the KumoScale block, file and object storage container storage are innovations that could drive additional value for the company and help in getting a better price in a future IPO, when the overall NAND flash industry is in a more profitable part of its cycle.

Kioxia Announcements Enhance Company Value

Japan

Kioxia Holdings Corporation manufactures semiconductor memory products. The Company develops, produces, and sells flash memory cards, solid state drives, secure digital memory cards, and other products. Kioxia Holdings also operates group management strategy formulation and management.

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Kioxia Holdings (285A JP)

Toshiba Finally Gets Into TOPIX but Beware the Baku (It's Complicated)

Beware the Baku. The Toshiba TOPIX Inclusion is long-awaited/expected but the setup is not as activists had hoped or planned. And there is a Catch...

Travis Lundy

Marvell Technologies Advances: Positive for Company’s Future

Marvell’s semiconductor products enable enable the next generation of accelerator-based solutions for network and storage management from...

Thomas Coughlin

Details of SK Hynix Acquisition of Intel Flash Business

SK hynix has acquired Intel's flash business, but does it make sense? SK hynix' management's statements indicate a disquieting misunderstanding of...

Jim Handy

Micron Updates Current Quarter Guidance

Micron Technology just upgraded its guidance for the current quarter. This Insight shows how this is positive for both Micron and for the industry.

Jim Handy

Kioxia Announcements Enhance Company Value

Kioxia announcements, particularly ethernet native SSDs and KumoScale block, file and object container storage support enhance future value.

Thomas Coughlin

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