Daily BriefsMost Read

Most Read: Vedanta Ltd, Kakao Games, Allied Properties (H.K.) and more

In today’s briefing:

  • Vedanta Delisting Proposal/Offer Fails (We Think)
  • Vedanta (VEDL IN): A Failed Delisting Will Now Pressure The Stock
  • Smartkarma Webinar | A Dividend Forecasting Model for Asia
  • Kakao Games – KOSDAQ150 December Inclusion and Lock Up Expiry
  • Allied Properties (56 HK): Amateur Hour

Vedanta Delisting Proposal/Offer Fails (We Think)

By Travis Lundy

Late Saturday night Vedanta Ltd (VEDL IN) released an announcement to the BSE and NSE that the biggest Delisting Offer in Indian history had failed. 

Regulation 19 (1) of the Delisting Regulations noted above is that either they did not get enough shares, or the Promoter got enough shares and rejected the price. In this case, as the next page of the announcement shows, they did not get enough shares. The required number of shares to reach 90% to trigger a Discovered Price was 1.341bn but the number of confirmed bid shares submitted was 1.2547bn shares. An additional 123.19mm shares had been submitted, taking the total to 1.378bn, which would have passed the hurdle, but those shares were not confirmed by bankers and custodians before the deadline. 

It was reported that the bankers DAM Capital and JP Morgan were seeking to extend the Delisting Offer for an extra day because of both the BSE outage Friday and the matter of some brokers only allowing bids at the Floor Price (reported Thursday). The BSE had already extended the hours of the Delisting Offer to 7pm Indian Standard Time, and this was seen to be helping. Apparently the bankers were not successful at the time. 

This will likely cause an unwind. This will hurt the price.

But wait…

An article put out by PTI (Press Trust of India) and syndicated across severalnewspapers has a quote saying…

Sources privy to the development said Vedanta is now exploring with regulatory authorities if the reverse book building period could be extended by one day.

There is still a chance, and while I thought VEDR should have had the extra day, I do not know that SEBI will give them the extra day now that the result has been announced. I would be surprised if they get the extra day.

More about the size of the unwind, the “fair” price vs comps, and possible mitigants below the fold.

Insights previously published in the timeline of the Vedanta Delisting Offer are listed below.

Relevant Insights To Date

Date Theme or Ticker Insight Title
2019 Indian M&A Guide Quiddity India M&A Guide 2019 
24 May 2020 Delisting Offers Indian Delisting/Exit Offers – Know Your Process and The Games Played 
19 Jun 2020 Failed Exit Offers Failed Exit Offers in India: Lessons for VEDL, ADANI, and HEXW? 
27 May 2020 Vedanta Ltd  Vedanta Delisting Offer – How It Goes From Here 
22 Jun 2020 Vedanta Ltd  Vedanta Delisting Offer: Opportunities and Timing 
25 Jun 2020 Vedanta Ltd  Vedanta Buyout Loan = HUGE Hindustan Zinc Div But May Change Vedanta RBB Timing 
14 Jul 2020 Vedanta Ltd  Putting Sightlines on the Vedanta Discovered Price 
18 Aug 2020 Vedanta Ltd  Putting Sightlines on the Vedanta Delisting Offer TIMING 
7 Sep 2020 Vedanta Ltd  Vedanta: Reaching The End Game 
17 Sep 2020 Vedanta Ltd  Vedanta : More Fuel For The Fire 
21 Sep 2020 Vedanta Ltd  Vedanta (VEDL): Cash Raised, Money Flow, and How It Affects Discovered Price 
29 Sep 2020 Vedanta Ltd  Vedanta Reverse Book Build Auction – It’s On And the Schedule From Here Is Tight 
4 Oct 2020 Vedanta Ltd  Vedanta Limited Reports Results: KEY Info on Deal Funding Embedded 
8 Oct 2020 Vedanta Ltd  Vedanta SellDown – Probably Futures 
9 Oct 2020 Vedanta Ltd  Vedanta – Someone Is Playing Silly Buggers But Even On The Last Day Investor Strategy Matters 

Vedanta (VEDL IN): A Failed Delisting Will Now Pressure The Stock

By Brian Freitas

Late last evening, Vedanta Ltd (VEDL IN) in an announcement to the Stock Exchanges said that its promoter Vedanta Resources (VED LN) had informed them that the Delisting Offer was deemed to have failed.

With just over 1.34bn shares needing to be tendered in the Reverse Book Building (RBB) process for the Promoters to reach a 90% shareholding, there were almost 1.378bn shares tendered. However, the number of confirmed shares was only 1.255bn which meant that the 90% threshold was not reached.

With the delisting having failed, shares that were tendered in the RBB process need to be returned within 10 working days. The stock will come under pressure on Monday with a final selloff once the locked up shares are released. With the futures in ban period, it is extremely difficult for investors to hedge their position.

The ADR Vedanta Ltd (VEDL US) had closed 7.74% lower on Friday, implying a local price of INR 109/share versus a close of INR 121.85/share on Vedanta Ltd (VEDL IN) on Friday.

In his Insight, we look at the numbers from the RBB process and try to figure out why the Delisting failed and what it could mean for the stock and Vedanta Resources (VED LN) going forward.

Smartkarma Webinar | A Dividend Forecasting Model for Asia

By Smartkarma Research

For our next Webinar, we welcome back Insight Provider Ankit Agrawal, CFA, who will discuss the findings of his forecasting model, as explored in his recent Smartkarma Original: Asia Dividend Forecasting | The Rise and Fall of Dividends Across Asian Companies – a quantitative approach for identifying Asian companies that are likely to raise or cut dividends. 

The webinar will be hosted on Wednesday, 14/October/2020, 5.00pm SGT/HKT.

Ankit Agrawal, CFA is the founder and CIO of Yellowstone Equity, a firm providing unbiased and independent research on Indian equities. He was previously on the buy-side with Howe & Rusling and Investcorp. 

Kakao Games – KOSDAQ150 December Inclusion and Lock Up Expiry

By Brian Freitas

Kakao Games (1404796D KS) is down almost 9% today due to the expiry of the 1 month lock up on IPO shares. Of the institutional allotment, there were 4.36m shares that were locked in for 1 month and are eligible for sale today. Volume traded so far today has already crossed 4.7m shares.

With the review period for changes to the KOSDAQ150 index in the December review ending on 30 October, this is a crucial phase that will determine if Kakao Games (1404796D KS) makes the cut for inclusion in the index.

Based on current prices, the stock easily makes the case for index inclusion and only a very steep fall over the next 2 weeks would take the stock out of the list of probable inclusions.

In this Insight, we look at the Kakao Games IPO, the criteria for inclusion in the KOSDAQ150 Index, and the impact on the stock if it is included in the index.

Allied Properties (56 HK): Amateur Hour

By David Blennerhassett

After the sanctioning of Allied Properties (H.K.) (56 HK)‘s (APH) Scheme (Allied Prop (56 HK): Scheme Done. AGL Next?) was thrice delayed by the High Court and further updates from the company shed no light on the issues faced, what was inconceivably feared became apparent last Friday night when the Court declined to sanction the Scheme.

This afternoon, the High Court judgment appeared on the Hong Kong Judiciary website. 

It is ultimately a frustrating read, one in which some of the Offeror’s (Allied (373 HK)) preparatory work was sloppy or poorly prepared.

But the great double-take in this ruling is a large portion of the judgment devoted to the headcount test at the Scheme vote.

APH is incorporated in Hong Kong. S674(c) of the Hong Kong Ordinance says “subject to subsection 2(a)…”.  Subsection 2(a) replaced the headcount rule with the 10%-of-float veto. The headcount test was abolished in 2012 after a decision was reached on a Companies Bill.

It is not clear why Allied’s counsel did not raise this abolishment; but instead, butchered an attempt to show a majority in number had occurred, and as a result of this off-piste analysis, negatively influenced the court on sanctioning the Scheme.

I expect Allied to appeal. I do not expect shares to resume trading during an appeal. 

Unfortunately for shareholders who approved the Scheme, payment under the offer appears some way off.

Before it’s here, it’s on Smartkarma