Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Event-Driven

<ul>
<li>Kum Yang announced a rights offering capital raise of 450 billion won which will be used for facility investments and debt repayment. </li>
<li>The estimated rights offering price is 38,950 won, which is 31% lower than current price (56,500 won). </li>
<li>We remain negative on Kum Yang. Despite the sharply lower rights offering price relative to current price, we would avoid the rights offering. </li>
</ul>


Kum Yang announced a rights offering capital raise of 450 billion won which will be used for facility investments and debt repayment. 
The estimated rights offering price is 38,950 won, which is 31% lower than current price (56,500 won). 
We remain negative on Kum Yang. Despite the sharply lower rights offering price relative to current price, we would avoid the rights offering. 


Kum Yang: Rights Offering Capital Raise of 450 Billion Won

<ul>
<li>In the past week, there were numerous local news accounts about a rights offering of nearly 800 billion won by Kum Yang. This has not been confirmed by the company. </li>
<li>Although Kum Yang has not committed to a rights offering, there is a high probability of such capital raise in 4Q24 which is likely to dilute existing shareholders. </li>
<li>Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as possible. </li>
</ul>


In the past week, there were numerous local news accounts about a rights offering of nearly 800 billion won by Kum Yang. This has not been confirmed by the company. 
Although Kum Yang has not committed to a rights offering, there is a high probability of such capital raise in 4Q24 which is likely to dilute existing shareholders. 
Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as possible. 


Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders

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.

Equity Capital Markets

<ul>
<li>The arbitrage is clear: it's the difference between stock rights/subscription costs and short hedge price. Kumyang's high market interest and volatility amplify this, suggesting unusual trading angles.</li>
<li>Kumyang's futures also show extreme volatility, likely causing excessive backwardation around the ex-rights date and stock rights window, affecting futures-based short hedge positions.</li>
<li>This opens up the possibility that, depending on entry points, our futures-based short hedge position might temporarily enter an unusual profitable zone relative to the stock rights and subscription costs.</li>
</ul>


The arbitrage is clear: it's the difference between stock rights/subscription costs and short hedge price. Kumyang's high market interest and volatility amplify this, suggesting unusual trading angles.
Kumyang's futures also show extreme volatility, likely causing excessive backwardation around the ex-rights date and stock rights window, affecting futures-based short hedge positions.
This opens up the possibility that, depending on entry points, our futures-based short hedge position might temporarily enter an unusual profitable zone relative to the stock rights and subscription costs.


Finding Unusual Arbitrage Angles in Kumyang's Effectively Pre-Announced Capital Increase

<ul>
<li>On 28 March, the external auditor of Kum Yang (Samil PriceWaterhouseCoopers) raised warnings about the viability of Kum Yang as a going concern. </li>
<li>The auditor also mentioned increasing probability of Chairman Ryu of Kum Yang potentially selling a portion of his shares to raise further capital.</li>
<li>It is RARE for an auditor to raise concerns about a company's viability of the entity as a going concern. This is likely to negatively impact Kum Yang's share price. </li>
</ul>


On 28 March, the external auditor of Kum Yang (Samil PriceWaterhouseCoopers) raised warnings about the viability of Kum Yang as a going concern. 
The auditor also mentioned increasing probability of Chairman Ryu of Kum Yang potentially selling a portion of his shares to raise further capital.
It is RARE for an auditor to raise concerns about a company's viability of the entity as a going concern. This is likely to negatively impact Kum Yang's share price. 


Kum Yang: Auditor Raises Flags on Viability as a Going Concern + Chairman Ryu Could Sell Shares

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.</li>
<li>Over halfway through the review period, we forecast 39 migrating stocks. Among new listings, 1 stock could be added to LargeCap, 3 to MidCap and 2 to SmallCap.</li>
<li>Three potential downward migrations were deleted from a global index in November. Now, four more potential downward migrations could be deleted from the same global index in February.</li>
</ul>


The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.
Over halfway through the review period, we forecast 39 migrating stocks. Among new listings, 1 stock could be added to LargeCap, 3 to MidCap and 2 to SmallCap.
Three potential downward migrations were deleted from a global index in November. Now, four more potential downward migrations could be deleted from the same global index in February.


KOSPI Size Indices: When Active Met Passive

South Korea

Kum Yang Co., Ltd. specializes in manufacturing blowing agents to foam rubber products and polymers.  The Company also produces other basic fine chemicals, such as sulphur products.

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Kum Yang (001570 KS)

Kum Yang: Rights Offering Capital Raise of 450 Billion Won

Kum Yang announced a rights offering capital raise of 450 billion won. The estimated rights offering price is 38,950 won, which is 31% lower than...

Douglas Kim

Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders

Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as...

Douglas Kim

Finding Unusual Arbitrage Angles in Kumyang's Effectively Pre-Announced Capital Increase

This post explores the potential for unusual trading opportunities that go beyond typical levels in Kumyang's massive capital increase event, which...

Sanghyun Park

Kum Yang: Auditor Raises Flags on Viability as a Going Concern + Chairman Ryu Could Sell Shares

After the market close on 3 April, Kum Yang reported that Chairman Ryu sold 4.55% of the company in a block deal at a price of 106,049 won (7.3%...

Douglas Kim

KOSPI Size Indices: When Active Met Passive

There could be 39 migrations in March. Most of the Large to Mid migrations have been, or will be, deleted from a large global index. Along with...

Brian Freitas

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