Event-Driven Archives | Page 74 of 187 | Smartkarma

Benesse Holdings (9783 JP) has recommended an EQT-backed pre-conditional MBO offer of JPY2,600 per share, a 45.1% and 36.3% premium to the undisturbed price and last close, respectively.
The pre-conditions primarily relate to Japanese and Chinese approvals, which can be waived. Chinese SAMR approval should be forthcoming as education is not a geopolitical fraught sector.
The offer is long-dated and opens in early February 2024. While not a knockout bid, the offer is fair in the context of Benesse’s muted outlook.

Fujisoft Tender Offer for Listed Sub Cybernet (4312) – This Is Too Cheap

Fuji Soft Inc (9749 JP), as target of activist-ish investor 3D Investment Partners, launched a “Special Committee to Increase Corporate Value” in August 2022. They reported in Nov22 and Feb23.
They also reported in Aug23, mentioning the four listed subs and synergies. Last week, Fujisoft announced it was buying them all out.
Cybernet Systems Co (4312 JP) is one of the two larger ones. It is being done too cheaply. Waaay too cheaply. It would not be impossible to block.

Vinx Corp (3784) TOB by Parent Fujisoft (9749) – A Bit Cheap, Impossible To Block

Fuji Soft Inc (9749 JP), as target of activist-ish investor 3D Investment Partners, launched a “Special Committee to Increase Corporate Value” in August 2022. They reported in Nov22 and Feb23.
They also reported in Aug23, mentioning the four listed subs and synergies. Last week, Fujisoft announced it was buying them all out.
Vinx Corp (3784 JP) is one of the two larger ones. It is being done too cheaply, but it would be nigh impossible to block. A safe deal.

Index Rebalance & ETF Flow Recap: SSE50, Chinext/50, Renesas, Tencent, Amman Mineral

Wednesday will be a busy day as positions are put on and unwound following announcement of the changes to the MSC indices.
Friday will end the review cutoff for the ASX indices and Hang Seng Indexes will announce the December changes for the HSI, HSCEI, HSTECH and HSCI post market close.
Another week of large outflows for China focused ETFs with redemptions across all the major indices.

Shidax Corporation (4837 JP): MBO Tender Offer at JPY800

Shidax Corp (4837 JP) has recommended an MBO tender offer of JPY800 per share, a 10.3% premium to the undisturbed price (9 November).
After the settlement of the tender offer, Oisix ra daichi (3182 JP) will acquire a 66.0% stake in the offeror by way of third-party allotment at the tender offer price.
Despite the skinny premium, the offer is just shy of the ten-year share price high. The minimum acceptance condition requires a 12.5% minority acceptance rate.

Last Week in Event SPACE: Korea’s Short Selling, Hollysys, Sankyo, Descente

The Korean Financial Services Commission and the Financial Supervisory Service held a press briefing, unveiling the comprehensive prohibition of short selling from the 6th November, until June 30th next year.
Recco or Ascendant for Hollysys (HOLI US)? Ascendant could easily get >50% of shares out, and spill the board. Recco, with no shares held, looks to have a weaker hand.
Sankyo (6417 JP) is cheap. It will never trade at 20x expected PER because of the nature of the business; right now, on an ex-cash basis, it trades 1.6x ex-cash PER.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: CMIC, IRC, Allkem, Benesse, Southern Cross, EOFlow, Shidax

I tally 41 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals were discussed on Smartkarma this week: Shidax (4837 JP)‘s and CMIC (2309 JP)‘s low-balled Offers; Benesse (9783 JP)‘s MBO/EQT Offer; and IRC (1029 HK)‘s MBO MGO.
Key updates took place for: Allkem Ltd (AKE AU), Orecorp Ltd (ORR AU), Southern Cross Media (SXL AU), EOFlow (294090 KS), and Hollysys Automation Technologies (HOLI US)

Taisei Corp (1801) Partial Tender for PS Mitsubishi Construction (1871)

Last week, as Ps Mitsubishi Construction (1871 JP) reported earnings, Taisei Corp (1801 JP) announced a Partial Offer for PS Mitsubishi, buying out Ube Cement & Taiheiyo Cement stakes.
Partial offers have recently traded well before the close, and badly after the result. As we near year-end, this one could trade a bit softer, suggesting a lower back end.
Shareholder Structure, Pro-ration analysis, and back end calculation grids below.

TIGER Battery Material ETF Rebal in December: Notable Changes in Constituent Screening

Based on the latest closing prices, the potential INs/OUTs are as follows. INs: Soulbrain & Enchem / OUTs: Chunbo & Solus Advanced Materials
While the overall market liquidity constraints due to the short-selling ban could exacerbate the price impact on the rebalancing day, it may reduce the flexibility of our Long-Short setup strategies.
While Chunbo carries single-stock futures, its liquidity may not be sufficient. So, a more creative Long-Short approach is required, taking into account these factors.

Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price

Just before the close Friday, the Nikkei reported Benesse Holdings (9783 JP) would be the subject of an MBO in order to restructure the flagging private shinken-zemi business. And grow.
It turns out it is EQT and the Fukutake family at ¥2600/share – a 2-year high. Wow. It is also a ridiculously cheap price given the assets and money flows.
I expect this may get some people upset as the valuation methodology is dodgy and the artful (hehehe) Balance Sheet has some easter eggs, and spotted pumpkins… or something.

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Nov 11

Daily Brief Event-Driven: Allkem/Livent Merger: 19th December Shareholder Vote and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Allkem/Livent Merger: 19th December Shareholder Vote
Shidax (4837) – Nikkei Scoops MBO (Anncmt Post-Close), Family Wants to Buy at ¥800 Which Is Too Low
Olympus (7733) – OP Hit but Additional Buyback; Positive Dynamics but Flow Risks Persist
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Santa Rally?

Allkem/Livent Merger: 19th December Shareholder Vote

On the 10th May, Aussie lithium miner Allkem Ltd (AKE AU) inked a $US10bn+ “merger of equals” with Livent (LTHM US), ostensibly forming the world’s fifth largest lithium producer.
Allkem’s Scheme Meeting is the 19 December, with implementation expected on the 4 January. The IE is supportive and Allkem’s board unanimously recommends the transaction.
This looks done. Buy Livent. And get borrow on Livent to be able to short it into the inclusion or in the days following.

Shidax (4837) – Nikkei Scoops MBO (Anncmt Post-Close), Family Wants to Buy at ¥800 Which Is Too Low

13mos ago I wrote about Shidax Corp (4837 JP) which an interesting restructuring past and a refreshing governance outlook going forward in Shidax Outlook May Change – Better Governance Matters.
The stock was up 25% in that period to yesterday. Today, a Nikkei article mid-day suggests the Shida family will launch an MBO. Stock popped. Earnings out after the close.
The article suggests a take-private MBO with Oisix ra daichi (3182 JP) again supporting the deal. 30 minutes ago Shidax responded saying an offer was put forth at ¥800/share.

Olympus (7733) – OP Hit but Additional Buyback; Positive Dynamics but Flow Risks Persist

Yesterday, Olympus Corp (7733 JP) announced Q2 earnings which were trifle light, and announced a sharp downward revision to full-year OP despite higher revs on weaker yen.
OP takes a hit because of expenses related to the shutdown of Veran Medical device sales (announced 6 Sep, “causing” a 2.4% share price fall the next day).
They also announced an ¥80bn buyback. That should be worth 3.0-3.5% of shares out, but overhang exists. The label is the label. The details are inside. They matter.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Santa Rally?

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

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Nov 10

Daily Brief Event-Driven: Renesas Electronics (6723 JP): INCJ Clean Up; Index Buying Smaller than Expected and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Renesas Electronics (6723 JP): INCJ Clean Up; Index Buying Smaller than Expected
Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip
P.S. Mitsubishi Construction (1871 JP): Taisei’s Partial Tender Offer
Spotlight on Trading Prospects Arising from ETFs as Short Selling Workarounds in Korea
Cybernet Systems (4312 JP): Fuji Soft’s Tender Offer at JPY1,095
IRC Limited (1029 HK): Mandatory Conditional Offer from the Chairman
IRC (1029 HK): MBO’s MGO. Look Away …
KKR/Telecom Italia: Uncertainty Endures

Renesas Electronics (6723 JP): INCJ Clean Up; Index Buying Smaller than Expected

INCJ is selling the last of its stake in Renesas Electronics (6723 JP). This will remove the overhang but could lead to selling in the short-term.
Renesas Electronics (6723 JP) has outperformed its peers over the last couple of years but valuations are in-line with the peer group (or slightly cheaper).
The float increase in global indices will coincide with the offering, but the TSE Tokyo Price Index TOPIX (TPX INDEX) float increase will take quite a while.-

Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip

Trend Micro Inc (4704 JP) has been under pressure to improve capital allocation after Value Act bought in 2022. In February 2023, Trend announced a weak sauce capital return policy.
They promised a 100% payout ratio with 70% div payout ratio. But with huge piles of cash and securities, it wasn’t going to be enough, and shareholder structure ALWAYS matters.
Here it meant Trend Micro was vulnerable to further attack. Today, Trend announced a HUGE capital return with buyback, and a special div and this will excite Nikkei 225 arbs.

P.S. Mitsubishi Construction (1871 JP): Taisei’s Partial Tender Offer

Ps Mitsubishi Construction (1871 JP)/PSMIC announced a partial tender offer for Taisei Corp (1801 JP) at JPY1,010 per share, a 22.4% premium to the undisturbed price.
The partial offer is for a minimum of 20.4 million shares (42.94% ownership ratio) and a maximum of 23.8 million shares (50.20% ownership ratio).
Irrevocables represent a 42.94% ownership ratio, satisfying the minimum acceptance condition. The offer is attractive and represents a ten-year high. The tender offer runs from 10 November to 11 December.

Spotlight on Trading Prospects Arising from ETFs as Short Selling Workarounds in Korea

During the previous period of short-selling restrictions, a pattern was observed in which ETFs were utilized as a workaround for short-selling.
We should anticipate more substantial price impacts this time. Of particular significance is the possibility of utilizing not only the MSCI Korea ETF but also sector ETFs for similar purposes.
This calls for our attention to the possibility that this short-selling workaround could generate a significantly wider range of trading opportunities in the spot market compared to three years ago.

Cybernet Systems (4312 JP): Fuji Soft’s Tender Offer at JPY1,095

Cybernet Systems Co (4312 JP) has recommended Fuji Soft Inc (9749 JP)’s tender offer of JPY1,095 per share, a 31.8% premium to the undisturbed price (8 November).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 12.28% ownership ratio.
The offer price is attractive and marginally below the ten-year share price high. The minimum acceptance condition (lower limit) requires a 26.9% minority acceptance rate, which is doable.

IRC Limited (1029 HK): Mandatory Conditional Offer from the Chairman

Irc Ltd (1029 HK) has announced a mandatory conditional offer from Nikolai Levitskii (Chairman) at HK$0.118 per share, a 32.6% premium to the undisturbed price (1 November).
The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. The offeror currently represents 30.61% of outstanding shares.
The offer looks light vs long-term trading ranges. The minimum acceptance threshold implies a minority acceptance rate of 27.9% (36.8% if MIC Invest does not tender), which is not onerous.

IRC (1029 HK): MBO’s MGO. Look Away …

Nikolai Levitskii, Russian iron-ore play IRC Ltd (1029 HK)‘s chairman and largest shareholder, has acquired 4.72% of shares out, lifting his stake above 30%, triggering an MGO.
The Offer price of HK$0.118/share, a 32.58% to last close, is the same price paid for the stake increase.
The Offer is conditional on Levitskii holding more than 50% of shares out. His intention is to maintain IRC’s listing.

KKR/Telecom Italia: Uncertainty Endures

By Jesus Rodriguez Aguilar

As a result of the deal with KKR, Telecom Italia SPA (TIT IM) projects a decrease in net debt of about €14 billion, bringing Net Debt/EBITDAaL from >4.5x to around 2.0x.
This should guarantee the survival of Telecom Italia, but Vivendi is ready to challenge the decision. Equity is volatile as net debt represents 3.7x the market cap. Debt looks more interesting.
TLIT 6.875 FEB-2028 with YTM 6.624, or TLIT 7.875 JUL-2028, with YTM 6.838, likely to profit from a rating upgrade. Savings shares are unlikely to receive a dividend until 2027.

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Nov 09

Daily Brief Event-Driven: Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?
Hollysys: Court Injunction Hearing Is Key
Alchip Technologies GDRs Early Look – Another Well Flagged GDR Issuance in the Pipeline
CMIC (2309 JP) – Huge Business Model Plan Appears to Hide Assets, Then an MBO. Ugh…
StubWorld: Digital Garage Looking “Cheap”. Melco’s Consensus-Missing Results
Southern Cross/ARN Media: Getting Cosy?
Momentum Trading Opportunities Among Top 50 Stocks in KOSDAQ With Highest Short Interest Ratios
ChiNext/ChiNext50 Index Rebalance Preview: Time for a Turnaround

Korea Short Sell Ban: Not a Lot Covered on Monday; Shorts Holding On?

Following the short sell ban announced on the weekend, the KOSPI 200 and KOSDAQ 150 opened higher on Monday and rallied through the day.
A lot of the intraday gains on Monday have been given up over the next two trading days. Surprisingly, KRX data indicates that not a lot of shorts have covered.
Foreigners have been net cash buyers since Monday (could indicate covering of offshore borrow) while retail were big sellers on Monday.

Hollysys: Court Injunction Hearing Is Key

Talk about your never-ending story. I count at least seven non-binding Offers for Hollysys Automation Technologies (HOLI US) since December 2020, three of which are still on the table.
The latest, at US$26/share, was pitched earlier this week from Ascendent Capital Partners; who along with Changli Wang, Hollysys’ founder, previously made an US$23/share Offer in August 2021.
However, all these Offers are largely moot until we get closure at the court injunction hearing. If that occurs. Separately, I had a solid discussion with Hollysys’ IR.

Alchip Technologies GDRs Early Look – Another Well Flagged GDR Issuance in the Pipeline

By Clarence Chu

Alchip Technologies (3661 TT) is looking to raise around US$375m in its upcoming global deposit receipts (GDRs) offering.
Similar to previous GDR listings, the deal is a very well flagged one, with a drawn out process of regulatory/approval loops the firm has to jump through up till issuance.
Based on its board’s approval to issue up to 4m new shares in its GDR offering, the deal is a relatively small one at just 5.4% of Alchip’s current mcap.

CMIC (2309 JP) – Huge Business Model Plan Appears to Hide Assets, Then an MBO. Ugh…

CMIC Holdings (2309 JP) decided to “change its business model” this past spring, transferring control of a consolidated JV and other subs to DNP.
The result changed the accounting, and the business model, capitalising future cashflow and net income in a “hidden” asset which may or may not be in the Financial Advisor’s valuation.
My read is this is being done too cheaply, and the price should be 30-60% higher. But, it would be tough to block this.

StubWorld: Digital Garage Looking “Cheap”. Melco’s Consensus-Missing Results

Digital Garage (4819 JP) is coming up “cheap” versus Kakaku.com Inc (2371 JP); and Melco International Development (200 HK) is trading “rich” to Melco Resorts & Entertainment (MLCO US).
Preceding my comments on DG and Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Southern Cross/ARN Media: Getting Cosy?

Back on the 18 October, media play Southern Cross Media (SXL AU) announced a non-binding indicative proposal from ARN Media (A1N AU) and Anchorage.
SXL shareholders are being offered, by way of a Scheme, 0.83 ARN shares and A$0.296/share in cash. SXL considers the terms to be “complex, and highly conditional”.
Reportedly SXL has now signed a confidentiality agreement to gather more info on ARN, possibly leading to a firm deal.

Momentum Trading Opportunities Among Top 50 Stocks in KOSDAQ With Highest Short Interest Ratios

In this insight, we discuss near-term momentum trading opportunities among the top 50 stocks in KOSDAQ with highest short interest ratios.
We have identified 10 companies in KOSDAQ that have high short interest ratios, among the worst performing stocks YTD, but with strongest share price performance in the past three days.
These 10 stocks are up on average 10% in the past three trading days, outperforming KOSDAQ which is up 3.7% in the same period.

ChiNext/ChiNext50 Index Rebalance Preview: Time for a Turnaround

With the review period complete, we forecast 9 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
Some of the potential adds will also have passive flows from the CSI Smallcap 500 Index trackers at the same time as the ChiNext Index rebalance.
The potential adds have slipped a lot versus the potential deletes over the last few months as the National Team has tried to stabilise the market via ETF creations.

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Nov 08

Daily Brief Event-Driven: Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban
TOPIX Inclusions: Who Is Ready (Nov 2023)
Sankyo (6417) – Second Go-Round for a BIG Buyback
Japan H1 Bank Earnings: Last Minute Update; Suruga Bank Reacts Well
Hollysys (HOLI US): Ascendent Capital Joins the Fray
Momentum Trading Opportunities Among Top 50 Stocks in KOSPI With Highest Short Interest Ratios
CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650
SSE50 Index Rebalance Preview: Five Potential Changes; Hygon Stands Out
Telefonica/Telefonica Deutschland Holding AG: Offer for Minorities
EQD | The Hang Seng Index May Go Higher

Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban

Given Korea’s blanket ban on short-selling, we should concentrate on the likelihood of these ADRs being significantly discounted compared to their underlying shares.
It should persist for an extended period, highlighting the importance of continuously monitoring ADR spreads over the next 2-3 months to seize the opportune entry timing.
Since all these carry single-stock futures, a flexible setup targeting this spread can be designed, ideally incorporating currency hedges.

TOPIX Inclusions: Who Is Ready (Nov 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Our main pre-event candidate CELSYS (3663 JP) has outperformed TOPIX by ~12.6% since 1 Sep (when it was highlighted) and 6 Nov 2023.
There are three TOPIX Inclusion events confirmed for the end of November and two other interesting pre-event names we are closely monitoring.

Sankyo (6417) – Second Go-Round for a BIG Buyback

Back in late September, Sankyo Co Ltd (6417 JP) announced a 10mm share buyback along with a new dividend policy. Only 4.22mm shares showed up to sell.
The largest holder – Exec Chair Busujima-san – sold 2.22mm shares under his own name and his company’s name. Hikari Tsushin, which had been selling in the market, didn’t participate.
Now Sankyo has launched another 10mm share ToSTNeT-3 buyback tomorrow (8 Nov) AM at ¥6,099/share. They may not complete. But they may continue buying later. They have oodles of cash.

Japan H1 Bank Earnings: Last Minute Update; Suruga Bank Reacts Well

I wrote Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still last week mentioning the trends in guidance revisions.
Since then, five have reported H1. +20%, +53%, +23% vs guidance; +25.6%, and +28.2% vs Last Year. Eight more have added new guidance, weighted average H1 up 48%.
Four more report tomorrow, eight on Thurs, 43 on Friday. The Top 5 are all next Mon/Tues. Watch for comments about portfolio restructuring efforts in H2 as market yields rise.

Hollysys (HOLI US): Ascendent Capital Joins the Fray

Ascendent Capital has made a non-binding proposal for Hollysys Automation Technologies (HOLI US) at US$26.00 per share, a 4.0% premium to the MBO and Recco proposal of US$25.00 per share.
Ascendent has also become the largest shareholder by securing 13.69% of outstanding shares at an average price of A$20.84 per share. Ascendant is supportive of the special meeting request.
The Board has tried several delaying tactics, but the emergence of Ascendant ramps up the pressure on the Board to conduct a transparent sale process and address shareholder concerns.

Momentum Trading Opportunities Among Top 50 Stocks in KOSPI With Highest Short Interest Ratios

In this insight, we discuss near-term momentum trading opportunities among the top 50 stocks in KOSPI with highest short interest ratios.
Given the recent temporary ban on stock short selling in Korea, there is likely to be increased volatility in the stock market.
We have identified 10 companies in particular that have high short interest ratios, among the worst performing stocks YTD, but with strongest share price performance in the past two days.

CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650

CMIC Holdings (2309 JP) has recommended an MBO tender offer of JPY2,650 per share, a 55.9% premium to the undisturbed price (7 November).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 41.29% ownership ratio.
Irrevocables to accept represent a 23.29% ownership ratio. While the offer is light vs. peer multiples, the minimum acceptance condition requires a 35.1% minority acceptance rate, which is doable.

SSE50 Index Rebalance Preview: Five Potential Changes; Hygon Stands Out

With the review period complete, we see 9 stocks in inclusion zone and 10 in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 4.7% at the December rebalance leading to a one-way trade of CNY 3.86bn. Index arb balances could increase the impact on the stocks.
Apart from being added to the SSE50 Index, Hygon Information Technology (688041 CH) could also be added to other local/global indices over the next few weeks and months.

Telefonica/Telefonica Deutschland Holding AG: Offer for Minorities

By Jesus Rodriguez Aguilar

Telefonica SA (TEF SM) surprised everyone with a €2.35/share voluntary cash offer for the minorities in Telefonica Deutschland Holding (O2D GR), 37.6% premium, 4.4x EV/Fwd EBITDA (vs.5.1x Telefonica), €1970 million value.
The premium is attractive, c.31% premium to median IBES consensus TP, so I believe the offer will succeed. There will be no additional acceptance period. Spread is +0.17%.
Telefonica will add 7% more leverage at a time it is seeking the opposite: on the cards are some sort of divestment of Virgin Media O2 or a dividend cut.

EQD | The Hang Seng Index May Go Higher

By Nico Rosti

The Hang Seng Index closed last week at 17664.12 (CC=+2), currently rallying this week, but there is a chance for a short-lived pullback (i.e. closing this week down).
The current global equities bounce should continue for the entire month of November: the HSI may continue rallying for +2 weeks (if it does not close down this week).
Price targets to watch for the end of the rally (i.e. shortable) are between 18300 and 18700.

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Nov 07

Daily Brief Event-Driven: Tencent (700 HK): Board Meets Next Week; In-Specie Dividend Candidates and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tencent (700 HK): Board Meets Next Week; In-Specie Dividend Candidates
Block Deal Sale of HYBE by Netmarble
Bajaj Finance QIP – Very Well Flagged US$1bn Raising, past Deals Have Done Well
OreCorp/Silvercorp: 8th December Shareholder Vote
OreCorp (ORR AU): A Wide Spread Heading into the 8 December Vote

Tencent (700 HK): Board Meets Next Week; In-Specie Dividend Candidates

Tencent (700 HK) announced in-specie dividends of JD.com (9618 HK) (US$15bn+) in 2021 and Meituan (3690 HK) (US$20bn) in 2022.
With the Tencent (700 HK) Board meeting on 15 November to approve Q3 results and considering the payment of a dividend, the pattern could repeat this year.
Tencent (700 HK) owns stakes of US$1bn+ in 10 listed companies. We take a look at the stocks that could be next in line to be paid as in-specie dividends.

Block Deal Sale of HYBE by Netmarble

After the market close on 6 November, Netmarble announced that it will sell 2.5 million shares of HYBE which represents 569 billion won in amount at current price.
The actual block deal amount is likely to be less than 569 billion won as there will likely be a block deal discount rate.
We would avoid this deal, mainly because we think HYBE is overvalued relative to its peers.

Bajaj Finance QIP – Very Well Flagged US$1bn Raising, past Deals Have Done Well

By Sumeet Singh

Bajaj Finance Ltd (BAF IN) , one of India’s largest NBFCs, aims to raise around US$1bn via a QIP.
Bajaj Finance is an NBFC offering auto, consumer and home loans, along with other products as well.
In this note, we run the deal through our ECM framework and talk about the deal dynamics.

OreCorp/Silvercorp: 8th December Shareholder Vote

Back on the 6 August, Western Australian-based miner OreCorp Ltd (ORR AU) signed a Scheme Implementation Deed with Canada’s Silvercorp Metals (SVM CN).
OreCorp shareholders are offered A$0.15 in cash and 0.0967 new Silvercorp shares – or an implied value of A$0.60 – for each OreCorp share held.
The Scheme Booklet is out with a shareholder vote on the 8 December. Implementation is the 22 December.

OreCorp (ORR AU): A Wide Spread Heading into the 8 December Vote

The Orecorp Ltd (ORR AU) IE considers Silvercorp Metals (SVM US)’s A$0.15 cash per share and 0.0967 SVM shares per ORR share offer fair and reasonable.
The offer is subject to the Tanzanian Fair Competition Commission and shareholder approval. The offer is attractive compared to the adjusted exchange ratios and historical prices.
While the offer has suffered from the steep SVM share price decline, there has been no visible dissent from major shareholders. At the last close, the gross spread was 12.1%.

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Nov 06

Daily Brief Event-Driven: Korea Short Sell Ban: Background and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Korea Short Sell Ban: Background, Manipulation, Holdings, Flows, Short Interest, Implications
Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights
Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes
Chindata (CD US): Maximum Dissent Condition in Focus as Oasis Builds a Stake
Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints
EQD | KOSPI 200 SHORT-SELLING BAN: Upward Push and Pullbacks
A/H Premium Tracker (To 3 Nov): Volatility Off, Spreads Jumpy, Short Sellers a NatSec Concern?
Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions
Merger Arb Mondays (06 Nov) – Haitong Intl, NWS, Poly Culture, Eoflow, Origin, Azure, Tietto
HK Connect SOUTHBOUND (To 3 Nov 23); CNOOC & China Mobile AGAIN See Outflows, SMIC & Xiaomi See Buys

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

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.

Full Transcript of Korea FSC Briefing on Sudden Short-Selling Ban, Including Key Trading Insights

There seems to be no immediate requirement to close existing contracts. However, even the chairman of the Financial Services Commission was unable to offer a definitive answer.
The comprehensive investigation and prohibition of the customary naked short selling could lead to a rapid decline in overall market liquidity.
The first is the short-term view, focusing on futures backwardation, and the second is the medium to long-term perspective, examining how the overall market liquidity decline will affect market flows.

Lee Family to Sell 2.6 Trillion Won in Samsung Companies to Pay for Inheritance Taxes

Lee family plans to sell additional 2.6 trillion won worth of Samsung Group companies as part of their fourth installment of inheritance taxes.
This inheritance tax share sale is likely to have a negative impact on Samsung Electronics, Samsung C&T, Samsung SDS, and Samsung Life Insurance.
This may be just a coincidence but the regulators announced today a temporary ban on stock short selling which should help the Lee family to unload their shares.

Chindata (CD US): Maximum Dissent Condition in Focus as Oasis Builds a Stake

Chindata Group (CD US)’s US$8.60 per ADS offer from Bain Capital is conditional on dissenting shareholders representing less than 12% of outstanding shares.
Oasis Management, an activist fund, recently disclosed a shareholding representing 65.9 million ordinary shares, 8.99% of outstanding shares and 1.24% of voting interest.
Precedent transactions where the dissent condition was exceeded suggest two possibilities – the offeror waives the condition or persuades sufficient shareholders to withdraw as dissenters.

Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints

Descente Ltd (8114 JP) saw Itochu report it had continued its streak of consecutive days of buying, extending it to 115. Now they own 44.1% of voting rights.
ANTA gave hints to the progress of Descente China in the Interim Results, and Q3 Operational Update. Descente analysts are 20% ahead of guidance, but they’re probably low still.
Descente reports Q2 tomorrow. I expect the numbers and presentation to surprise at the Net Profit level. I expect a forecast revision.

EQD | KOSPI 200 SHORT-SELLING BAN: Upward Push and Pullbacks

By Nico Rosti

Banning short-selling for stocks will provide some propulsion to the KOSPI 200 INDEX but inevitably there will be pullbacks when strong resistance areas are reached.
The index is joining a wide global equities bounce, it is not recommended to go SHORT soon. There is a chance it may pullback briefly this week (buy the dip?)
Our models say the index can rise from 2 to 4 weeks, before reversing: resistance will be met at 320, 328 and (hard to reach) 349.

A/H Premium Tracker (To 3 Nov): Volatility Off, Spreads Jumpy, Short Sellers a NatSec Concern?

The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Absolutely STONKING performance this past week – +1.62% Friday to Friday across 42 trades. Positive performance in every sector. Portfolio at new high. Southbound inflows. BigCapHighDiv SOE outflows.
Short sales this week now need 100% in the account for hedge funds. And the MSS claims some are short-selling or talking bearishly on stocks for political reasons.

Samsung Founder Family’s Pre-Announced Block Deals: Contract Terms & Fresh Contextual Conditions

Considering year-end dividends, it appears likely that the trading timing might extend beyond this year. In the previous case, the trade execution timing was one month before the contract expired.
Short selling is prohibited. However, all four companies offer single-stock futures, which provide instruments for proactive positioning. Nevertheless, aspects to consider are likely to increase regarding trading convenience and liquidity.
The potential for inadequate liquidity might increase the discounts for these deals, potentially offering us fresh trading opportunities. We should proactively prepare trading setups that consider these contextual conditions.

Merger Arb Mondays (06 Nov) – Haitong Intl, NWS, Poly Culture, Eoflow, Origin, Azure, Tietto

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU), JSR Corp (4185 JP), Orecorp Ltd (ORR AU), Lithium Power.
Lowest spreads – Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Chindata Group (CD US), Tietto Minerals Ltd (TIE AU), T&K Toka Co Ltd (4636 JP), Allkem.

HK Connect SOUTHBOUND (To 3 Nov 23); CNOOC & China Mobile AGAIN See Outflows, SMIC & Xiaomi See Buys

This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
SOUTHBOUND flows the last four weeks clearly indicate a momentum move. The top net sells are all down. The top buys are all up.
Xiaomi Corp (1810 HK) and Semiconductor Manufacturing International Corp (SMIC) (981 HK) were the top net SOUTHBOUND inflows as SOUTHBOUND bought HK$8.515bn this past week.

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Nov 05

Daily Brief Event-Driven: Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
Last Week in Event SPACE: Hokuhoku, Origin Energy, KDDI, BoJ
Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year
EQD | Nikkei 225 (NKY)’s November Rally: How Far Can It GO?
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tietto Teraoka Seisakusho, Symbio, Celltrion Health, EOFlow
Index Rebalance & ETF Flow Recap: NEXT50, SET50, L&F, Onewo, Celltrion, AMFI

Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation

We should consider the complete prohibition of short selling for the next six months as practically finalized.
Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.

Last Week in Event SPACE: Hokuhoku, Origin Energy, KDDI, BoJ

If you are still long the Financial Group (8377 JP) from before, stay long.If you sold Hokuhoku from before, be long again, and buy on weakness
Disaster for arb players as AusSuper rewrites the record books as an investor class and shoots down Brookfield’s sweetened Offer for Origin Energy (ORG AU).
Kyocera (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI (9433 JP) shares (after an AGM disaster).

Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year

Daito Trust last week announced H1 earnings, its 50% dividend payout ratio, and a ¥50bn stock buyback which results in a shareholder payout ratio of ~120% over the next year.
This should help to keep ROE high, and as it is a clear distribution of surplus, it should help keep the multiple up.
It is worth looking at shareholder structure to see how this buyback will be taken.

EQD | Nikkei 225 (NKY)’s November Rally: How Far Can It GO?

By Nico Rosti

The Nikkei closed the month of October down, 4 months down in a row (CC=-4), very OVERSOLD MONTHLY. The 30600 support indicated in our last MONTHLY insight did hold somehow.
We think the Nikkei could continue to rally in November, but this explosive, fast rally, at one point will have to retrace back, before it can continue up.
The index could rally for 2 months, into December. The target prices for the end of the rally are near 34000.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tietto Teraoka Seisakusho, Symbio, Celltrion Health, EOFlow

I tally 40 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deal was discussed on Smartkarma this week: Zhaojin Mining Industry H (1818 HK)‘s tilt for Tietto Minerals Ltd (TIE AU); and Teraoka Seisakusho (4987 JP)‘s MBO.
Key updates took place for: Symbio Holdings (SYM AU), Lansen Pharmaceutical Holdings Co, Ltd. (503 HK), Celltrion Healthcare (091990 KS), and EOFlow (294090 KS).

Index Rebalance & ETF Flow Recap: NEXT50, SET50, L&F, Onewo, Celltrion, AMFI

There were a bunch of indices where the review period ended last week. The changes will be announced this month and implemented in December.
Emerald Resources Nl (EMR AU) replaced Invocare Ltd (IVC AU) in the S&P/ASX 200 (AS51 INDEX) at the close on Friday.
There were large outflows from mainland China listed ETFs during the week. Outflows from iShares Emerging Markets (EEM US) continued for another week.

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Nov 04

Daily Brief Event-Driven: Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
Start of Tender Offer

Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT

KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
If we observe a somewhat unusual downward trend in SK Square’s price from the 15th, this could be seen as a hint foretelling the announcement of SK Square’s exclusion.

Start of Tender Offer

By Jesus Rodriguez Aguilar

The $26.00/share cash offer of Thermo Fisher Scientific (TMO UN) for Swedish Olink Holding (OLK US) started on 31 October. The 74% premium reflects that high-growth, positive adjusted EBITDA targets are rare.
The offer values Olink at ~12.2x EV/NTM Fwd revenue vs. 6.4x median of peers. Irrevocables total 66%, but the minimum acceptance condition requires acceptances from a high 70.6% of float.
Barring any unforeseen circumstances, such as regulatory action, I anticipate the deal closing and set my TP at $26/share. Gross spread is 4.81%.

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Nov 03

Daily Brief Event-Driven: Origin: Brookfield Bumps. AustralianSuper Say Meh. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Origin: Brookfield Bumps. AustralianSuper Say Meh.
Celltrion Merger Update: Limits Lifted
Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer
Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
Quiddity HSTECH Dec 23 Flow Expectations: US$512mn One-Way Flows if the Expected Change Takes Place
Quiddity HSCEI Dec 23 Rebalance: Zhongsheng Vs China Grand Pair Interesting if Deletion Is Confirmed

Origin: Brookfield Bumps. AustralianSuper Say Meh.

On the 31st October, AustralianSuper (with 13.67% of shares out and Origin Energy (ORG AU)‘s largest shareholder) argued the Brookfield/EIG-backed Consortium Offer remained substantially below its estimate of fair value.
Brookfield/EIG have now increased their Offer by 8% to $9.53/share from $8.81/share, which now comprises cash components of A$6.59/share and US$1.86/share. A consideration-reducing fully-franked dividend of A$0.39/share is expected.
The Offer is declared “best and final.” It is above the top-end of the IE’s valuation range. AustralianSuper should accept the revised terms. But they say no.

Celltrion Merger Update: Limits Lifted

Back on the 17 August, biopharmaceuticals developer and producer Celltrion Inc (068270 KS) announced a merger with Celltrion Healthcare (091990 KS).
On October 23rd, shareholders approved the merger. The appraisal rights exercise period commenced on the 23 October and ends on November 13. 28th December is the merger’s effective date.
Initially, the stock purchase rights limit was set at 1₩tn; however Celltrion Group’s founder/Chairman Seo Jung-jin has removed this limit. That takes care of NPS, which opposes the merger.

Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer

Origin Energy (ORG AU) has disclosed a best and final offer from Brookfield/EIG at A$6.59 and US$1.86 per share, which implies A$9.53 per share, 8.1% higher than the previous offer.
AusSuper will vote against the final offer. Taking advantage of the share price dip, AusSuper is said to have further increased its shareholding to 14.98% of outstanding shares.
The scheme will likely fail as a minority YES vote turnout of 88% is required to pass. Brookfield/EIG could return with an off-market takeover offer, but it also faces issues.

Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?