In today’s briefing:
- CATL (3750 HK): Reassessing Index Fast Entry; Need Overallotment Exercised by Tomorrow
- GMO Internet (4784) – Squeeze-Able So Squeezing, Offering Likely Gets Pulled – AVOID LIKE THE PLAGUE
- CATL (3750 HK): The Tail Wags the Dog
- CATL (3750 HK)’s Concentration Warning
- S&P/ASX Index Rebalance Preview (June 2025): 10 Potential Changes Across Indices
- CSI Medical Service Index Rebalance Preview: Five Changes as Trade Flatlines
- [Japan Activism/M&A] – Thinking About Positioning Around the Tsuruha/Welcia Vote
- Jiangsu Hengrui Pharma H Share Listing (1276 HK): Trading Debut
- Soundwill Holdings (878 HK): An Opportunity or Another HK Arbageddon?
- HD Hyundai Marine Solution Block Deal Sale of 8.5% of Outstanding Shares
CATL (3750 HK): Reassessing Index Fast Entry; Need Overallotment Exercised by Tomorrow
- CATL (3750 HK) is trading at a 6.9% premium to Contemporary Amperex Technology (CATL) (300750 CH) – if that is due to expectations of Fast Entry, that premium could drop.
- CATL (3750 HK) has not announced the overallotment option as exercised and that puts Fast Entry at risk. An announcement prior to the close tomorrow could lead to Fast Entry.
- The earliest inclusion could be at the close on 30 May while the other global index inclusion looks likely in December.
GMO Internet (4784) – Squeeze-Able So Squeezing, Offering Likely Gets Pulled – AVOID LIKE THE PLAGUE
- GMO Internet (4784 JP) was created by the reverse takeover of a listed cad/media company by its parent company’s “internet infrastructure” business. GMO Internet Group ended up with ~98%.
- In the process, the stock rose 500%. Now, as part of its promise to the TSE allowing TSE Prime membership for the extraordinarily low-float target, the parent is offering shares.
- The squeeze has it at 180x Dec25e EPS, 111x EBIT, 70x book. The offering likely gets pulled and the stock isn’t shortable… so what next? Pain, and an ECLWO.
CATL (3750 HK): The Tail Wags the Dog
- The buying in Contemporary Amperex Technology (3750 HK) over the last couple of days has dragged Contemporary Amperex Technology (CATL) (300750 CH) higher as the arbs trade the AH spread.
- The Fast Entry into a global index could keep CATL (3750 HK) supported over the next few trading days, but reality will take hold pretty soon.
- Short CATL (3750 HK) / long CATL (300750 CH) offers great risk/reward, while an outright CATL (3750 HK) short offers higher return albeit at a much higher level of risk.
CATL (3750 HK)’s Concentration Warning
- Contemporary Amperex Technology (3750 HK) (CATL H), a global leader in providing battery solutions, was listed on the 20th May at $263/share. Here is the prospectus.
- Via the H-share listing, CATL raised ~US$5.2bn. Shares have since gained ~26% and trade at HK$330/share, as I type.
- It is worth noting the HKEx issued a high concentration warning in CATL’s H shares the day before shares were listed.
S&P/ASX Index Rebalance Preview (June 2025): 10 Potential Changes Across Indices
- With the review period nearly complete, there could be one change each for the S&P/ASX20 Index, S&P/ASX50 Index and S&P/ASX200 INDEX and two changes for the S&P/ASX100 Index in June.
- Passive trackers will need to buy between 1-12.5 days of ADV in the forecast adds and sell between 0.6-9.8 days of ADV in the forecast deletes.
- While cumulative excess volume has increased in the forecast adds and deletes, there could be underpositioning relative to the estimated passive flow in Perseus Mining, Viva Energy and Nick Scali.
CSI Medical Service Index Rebalance Preview: Five Changes as Trade Flatlines
- The review period ended on 30 April, the changes should be announced on 30 May and will be effective after the close of trading on 13 June.
- There could be 5 changes in June where passive trackers will need to trade between 0.7-2x ADV in the forecast adds and sell between 1-4x ADV in the forecast deletes.
- A long adds/ short deletes trade has gone nowhere in the last 6-7 months, and the volatility of the trade has reduced even further in the last couple of months.
[Japan Activism/M&A] – Thinking About Positioning Around the Tsuruha/Welcia Vote
- The Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) AGMs to elect directors and approve the share exchange agreement to merge the two.
- 10% Tsuruha shareholder Orbis objects to the merger ratio AND the later tender whereby Aeon goes to 51%, saying everything is underpriced. ISS/GlassLewis recommend voting against the merger.
- I haven’t seen the proxy reports but I’ve done the math. Investors/arbs should look at the possibilities/probabilities and understand what dependencies exist. Shareholders are not helpless, no matter the outcome.
Jiangsu Hengrui Pharma H Share Listing (1276 HK): Trading Debut
- Jiangsu Hengrui Pharmaceuticals (1276 HK) priced its H Share at HK$44.05 to raise HK$9,890.1 million (US$1.3 billion) in gross proceeds. The H Share will be listed tomorrow.
- The timing of the H Share listing is fortuitous, as the peers have materially re-rated since the prospectus was released on 15 May.
- Hengrui had the highest oversubscription rates among recent large AH listings. The AH discount implied by the offer is attractive.
Soundwill Holdings (878 HK): An Opportunity or Another HK Arbageddon?
- The spread to the Foo family’s HK$8.50 offer for Soundwill Holdings (878 HK) has materially increased to 15.8% over the last two trading days. The vote is on 23 May.
- Several readers have asked if the Soundwill offer will mirror the Goldlion Holdings (533 HK) deal break. The two schemes share similarities but are also different in several ways.
- The share price action either reflects an imminent deal break or a result of a negative feedback loop. Tread carefully as this is a high-risk/high-reward situation.
HD Hyundai Marine Solution Block Deal Sale of 8.5% of Outstanding Shares
- After the market close today, it was announced that KKR is selling 3.81 million shares (8.5% of outstanding shares) of HD Hyundai Marine Solution in a block deal sale.
- The expected block deal sale price is 145,000 won to 148,000 won per share, which represent 7.96% to 9.83% discount to the closing price of 160,800 won on 22 May.
- Once this block deal is completed, KKR’s remaining stake in HD Hyundai Marine Solution will be reduced to 11% (4.94 million shares).
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