Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>After the market close on 23 June, SK Innovation (096770 KS) announced that the company will conduct a rights offering worth 1.2 trillion won. </li>
<li>We have a positive view on SK Innovation's rights offering of 1.2 trillion won. The expected rights offering price is 143,800 won which is 21% discount to current price. </li>
<li>Although we have a positive view of SK Innovation over the next 12 months, its share price could face some weakness in the near term due to this capital increase. </li>
</ul>


After the market close on 23 June, SK Innovation (096770 KS) announced that the company will conduct a rights offering worth 1.2 trillion won. 
We have a positive view on SK Innovation's rights offering of 1.2 trillion won. The expected rights offering price is 143,800 won which is 21% discount to current price. 
Although we have a positive view of SK Innovation over the next 12 months, its share price could face some weakness in the near term due to this capital increase. 


SK Innovation: Rights Offering of 1.2 Trillion Won at a 21% Discount to Current Price

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

<ul>
<li>We should seize the arbitrage trading opportunities between SSF and subscription rights during the rights trading window. SK Innovation's SSF is highly liquid, being traded at nearly 0.5x spot.</li>
<li>The key is to catch the timing of basis widening. SK Innovation traditionally experiences significant intraday basis fluctuations, making it a crucial factor in maximizing our profitability.</li>
<li>The ex-date play, betting on the tendency for prices to close above the base price on the ex-date, may not hold significant appeal. This pattern has become less pronounced recently.</li>
</ul>


We should seize the arbitrage trading opportunities between SSF and subscription rights during the rights trading window. SK Innovation's SSF is highly liquid, being traded at nearly 0.5x spot.
The key is to catch the timing of basis widening. SK Innovation traditionally experiences significant intraday basis fluctuations, making it a crucial factor in maximizing our profitability.
The ex-date play, betting on the tendency for prices to close above the base price on the ex-date, may not hold significant appeal. This pattern has become less pronounced recently.


What Arb Trading Opportunities Should We Target in SK Innovation's Rights Offering?

<ul>
<li>It has been reported that SK On received 1.2 trillion won investment from a consortium led by MBK Partners and SNB Capital, valuing SK On at about 25 trillion won.</li>
<li>Our SoTP valuation of SK Innovation suggests a target price of 274,738 won per share, which represents a 38% higher levels than current price.</li>
<li>SK Innovation's 96.5% stake in SK On (24.1 trillion won in value) is 130% higher than SK Innovation's current market cap.</li>
</ul>


It has been reported that SK On received 1.2 trillion won investment from a consortium led by MBK Partners and SNB Capital, valuing SK On at about 25 trillion won.
Our SoTP valuation of SK Innovation suggests a target price of 274,738 won per share, which represents a 38% higher levels than current price.
SK Innovation's 96.5% stake in SK On (24.1 trillion won in value) is 130% higher than SK Innovation's current market cap.


Higher Private Market Valuation of SK On: Positive Impact on SK Innovation

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

Korea Stock Exchange KOSPI 200 / Event-Driven

<ul>
<li>Korea banned all short selling in March 2020 and resumed short selling only on <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> index constituents in May 2021.</li>
<li>News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.</li>
<li>There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.</li>
</ul>


Korea banned all short selling in March 2020 and resumed short selling only on KOSPI 200 and KOSDAQ 150 index constituents in May 2021.
News reports indicate that there could be another short sell ban as soon as the coming week. Indications are that the ban could last 6 months.
There are many implications of a total short sell ban including futures backwardation, market manipulation, and no emerging to developed market promotion.


Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Douglas Research Advisory

<ul>
<li>This insight is a book review of 주주 권리가 없는 나라 (A Country Without Shareholder Rights), which is one of the best books on the corporate governance in Korea.</li>
<li>There are so much wisdom that are included in this book. The author really goes into details about numerous corporate governance problems in Korea and ways to fix them.</li>
<li>This book was published in January 2024 and it was written by a famous Korean retail investor called Park Young-Ok.</li>
</ul>


This insight is a book review of 주주 권리가 없는 나라 (A Country Without Shareholder Rights), which is one of the best books on the corporate governance in Korea.
There are so much wisdom that are included in this book. The author really goes into details about numerous corporate governance problems in Korea and ways to fix them.
This book was published in January 2024 and it was written by a famous Korean retail investor called Park Young-Ok.


A Country Without Shareholder Rights (주주 권리가 없는 나라) - A Book Review

South Korea

SK Innovation Co., Ltd. refines, markets, and distributes oil.  The Company produces a variety of petroleum products, such as gasoline, kerosene, liquefied petroleumgas (LPG), and diesel oil.  SK Energy also manufactures petrochemical p roducts, including paraxylene, synthetic resins, styrene monomer, and ethylene.

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SK Innovation (096770 KS)

SK Innovation: Rights Offering of 1.2 Trillion Won at a 21% Discount to Current Price

On 2 August, SK Innovation announced that its rights offering amount will be raised to 1.3 trillion won (higher than the original expected amount...

Douglas Kim

What Arb Trading Opportunities Should We Target in SK Innovation's Rights Offering?

This post delves into potential arbitrage trading prospects that could be capitalized upon through SK Innovation's ₩1T rights offering.

Sanghyun Park

Higher Private Market Valuation of SK On: Positive Impact on SK Innovation

SK Innovation's 96.5% stake in SK On (24.1 trillion won in value) is 130% higher than SK Innovation's current market cap.

Douglas Kim

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications

Media reports indicate that there could be a temporary short sell ban in Korea. This could lead to futures backwardation, market manipulation and a...

Brian Freitas

A Country Without Shareholder Rights (주주 권리가 없는 나라) - A Book Review

This insight is a book review of 주주 권리가 없는 나라 (A Country Without Shareholder Rights), which is one of the best books on the corporate governance in...

Douglas Kim

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