Daily BriefsEvent-Driven

Daily Brief Event-Driven: Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect and more

In today’s briefing:

  • Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc
  • Hong Kong CEO & Director Dealings – 26th July 2022
  • Chinese GDRs on the SIX Exchange – More Names, Smaller Discounts, Smaller Size, Less Liquidity
  • MACA’s Recommended $1.025 Per Share Takeover Offer from Thiess
  • More End of Lock-Up Shares (ESOP) For Kakao Bank, Krafton, and Lotte Rental in August
  • Explaining ESOP Margin Call Situation for Kakao Bank & Krafton
  • S&P BSE Quiddity Leaderboard Dec 2022: Some More Interesting LONG-SHORT Pairs
  • Dufry/Autogrill: Another Attempt to Create a Travel-Concession Giant

Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc

By Travis Lundy

  • This morning – 26 July – Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX.
  • When Alibaba listed in NY, it was on ADRs. When it listed in HK, it was the shares underlying the ADRs but it was a quickie secondary listing.
  • It will now seek a dual primary listing as others have. This will make BABA Southbound-eligible and will slightly improve BABA’s HSI funding trade prospects in future. 

Hong Kong CEO & Director Dealings – 26th July 2022

By David Blennerhassett

  • The data in this insight is collated from the “shareholding disclosure” link on the HKEx website. 
  • Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute. 
  • These insights also flags those companies where shares have been pledged, both recently and ongoing.

Chinese GDRs on the SIX Exchange – More Names, Smaller Discounts, Smaller Size, Less Liquidity

By Travis Lundy

  • China started mulling an expansion of its Stock Connect relationships in late 2021 with plans to allow GDR issuance in Switzerland and eventually Germany.
  • New GDR issuance rules came into effect in February and companies started planning to issue GDRs in Switzerland in March.
  • The new SIX Listing Rules went into effect 25 July. Two companies priced GDRs on 22 July and two more yesterday. US$1.5bn so far. There are 6 more near-term.

MACA’s Recommended $1.025 Per Share Takeover Offer from Thiess

By Arun George

  • MACA Ltd (MLD AU) has recommended a A$1.025 per share offer from Thiess. The offer price represents a 28.1% premium to the unaffected price of A$0.80 (on 25 July).
  • The offer is conditional on a 90% minimum acceptance condition and regulatory approvals (FIRB and ACCC). The target statement will be released in late August.
  • We think that the offer is reasonable in the context of historical share prices and multiples. At the last close, the gross spread is 3.5%.

More End of Lock-Up Shares (ESOP) For Kakao Bank, Krafton, and Lotte Rental in August

By Douglas Kim

  • In August, there will be material ESOP related shares of Kakao Bank, Krafton, and Lotte Rental shares that could be released (one year after their IPOs).
  • The potential sale of more ESOP shares could further negatively impact their share prices. In addition, they face significant competition and their near term financial outlook is less clear.
  • Although their valuation multiples have declined materially in the past year due to declining share prices, their valuation levels are still not overly attractive. 

Explaining ESOP Margin Call Situation for Kakao Bank & Krafton

By Sanghyun Park

  • Many employees of both companies must have participated in the ESOP subscription with stock-backed loans.
  • At the last close, the Kakao Bank ESOP must pay 14.34% of the initial total investment as additional withholdings. Krafton is much worse at 30.25%.
  • It seems highly likely that this situation will lead to a short-term flow distortion, substantial enough for us to consider setting up a position aimed at this.

S&P BSE Quiddity Leaderboard Dec 2022: Some More Interesting LONG-SHORT Pairs

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
  • SENSEX and BSE 100 could both see one index change each. There could be multiple ADDs/DELs for the BSE 200 and BSE 500 indices.
  • There are several trading opportunities with interesting potential index flow dynamics.

Dufry/Autogrill: Another Attempt to Create a Travel-Concession Giant

By Jesus Rodriguez Aguilar

  • Dufry and Autogrill agree an all-stock deal (0.158 DUFN SW x 1 AGL IM) to create a travel-related concession giant. The Benettons will become the largest shareholders (c.25%).
  • The deal should bolster Dufry’s balance sheet and add scale, helpful in tenders. Shareholders of Autogrill seem to be the main beneficiaries of the deal.
  • As per the terms, spread on all-share is 14% premium, while that on cash alternative is 0.2% premium. Only a recovery of Dufry’s share price would justify opening a position.

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