Event-Driven and Index Rebalance

Weekly Top Ten Event-Driven and Index Rebalance – Jun 16, 2024

This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Unsolicited Partial Offer for 19% of Sun Corp (6736 JP) – Play on Cellebrite from SPAC Sponsor

By Travis Lundy, Quiddity Advisors

  • Sun Corp (6736 JP) for years has been a play on its investment holding in Cellebrite DI (CLBT US), brought to market in a $2.4bn SPAC deal announced 30Aug2021.  
  • The SPAC entity was an entity called TWC Tech Holdings II Corp (TWC = “True Wind Capital”). The next day, Cellebrite DI (CLBT US) was born, trading up to US$11.00+.
  • Sun Corp (6736 JP)‘s value realisation path had begun. Today, a True Winds entity announced a Partial Tender Offer – unsolicited, unannounced previously – on Sun Corp, for 19.0%.

2. Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals

By Douglas Kim, Douglas Research Advisory

  • Starting 24 July, there will be a mandatory pre-announcement requirement for block deal sales in Korea. 
  • In other words, the major shareholders of the Korean companies need to report publicly prior to their actual sales of their stakes in these companies through block deal sales.
  • The potential block deal sales candidates could continue to underperform on average the companies that are selling these stocks in potential block deal sales in the next several weeks. 

3. Yuanta/​P-Shares Taiwan Div+ ETF Rebalance: One Surprise as Round-Trip Trade Hits US$2.3bn

By Brian Freitas, Periscope Analytics

  • There are 5 adds and 5 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in June with implementation taking place from 21-27 June.
  • The constituent changes and capping changes result in an estimated one-way turnover of 12.8% and in a one-way trade of TWD 37.2bn (US$1.15bn).
  • The changes are in line with our forecasts with one exception. Uni President Enterprises (1216 TT) was not added and Yulon Finance (9941 TT) was added instead.

4. [JAPAN ACTIVISM] Palliser Gets ISS/GL Nods for Keisei AGM Proposals – How Will The Swing Vote Swing?

By Travis Lundy, Quiddity Advisors

  • In Oct2023, activist Palliser Capital launched a campaign on well-known “stub trade” Keisei Electric Railway Co (9009 JP) (1.6% stake). The proposal? Monetise OLC, invest for growth, be shareholder friendly.
  • Keisei responded 3+mos ago: buyback and 1% OLC stake sale but said OLC would remain an equity affiliate. Palliser re-engaged in late April (Japanese/English and two AGM agenda items). Keisei objected.
  • Palliser made their case, Glass Lewis and ISS support Palliser. Palliser likely cannot win. The goal here isn’t to win though. It is to get enough to raise management consciousness. 

5. Helios Techno Holding (6927) TOB – Today Could Be The Day

By Travis Lundy, Quiddity Advisors

  • Rs Technologies (3445 JP) announced a TOB on Helios Techno Holding (6927 JP) 12 days ago. At a 74% premium, but that was too cheap. I discussed it here.
  • Shares went limit up for two days then traded huge volume the first full day last Wednesday. The lowest trade so far in open trading is 3% through terms.
  • 57% of Shares Out Ex-Treasury have traded in five days. Anyone who bought 5% on Day 1 has to file a Large Shareholder Report today.

6. Technology Select Sector Index (XLK US): NVIDIA Could Flip Places with Apple; HUGE Flows

By Brian Freitas, Periscope Analytics

7. Fancl (4921) TOB – Kirin (2503) Does the Inevitable and Takes Out Minorities. Lightish But…

By Travis Lundy, Quiddity Advisors

  • Kirin Holdings (2503 JP) bought a 33% stake from the founder and several others in August 2019. Five years later, they are coming back for the rest. 
  • The price here is ¥2,690/share which is a 42.7% premium from yesterday’s close. Kirin paid 20+% more in 2019. Earnings fell, but they paid 37x NTM. This is 32x. 
  • This is lightish… but…  this should get done. Activism would be difficult. There are enough shareholders who should be OK getting out. This should trade tight.

8. Sciclone Pharmaceuticals (6600.HK) Privatization Update – Some “Unstable Factors” During Voting

By Xinyao (Criss) Wang

  • Some shareholders have confirmed to be acting in concert at the Court Meeting, but long-term investors may vote against the privatization because they are not satisfied with the Cancellation Price.
  • The success rate of SciClone’s privatization is lower than that of China TCM and L’Occitane. If fails, there’s a high probability that the share price will fall back to HK$14/share.
  • The current share price cannot provide decent returns. Together with exchange rate risk, potential failure risks, etc., there’s no need for investors to take risks at this share price level.

9. Sun Corporation (6736 JP): True Wind’s Hostile Partial Offer

By Arun George, Global Equity Research Ltd

  • True Wind has launched a hostile partial tender offer for Sun Corp (6736 JP) for a minimum (3.8m) and maximum (4.2m) shares at JPY4,400, 19.2% premium to the undisturbed price.
  • The offer was prompted by frustration with the Board’s lack of urgency in closing the disparity between Sun Corp’s market cap and the value of its Cellebrite DI (CLBT US) stake.
  • The Board has three options: do nothing (low probability), find a white knight bidder (high probability), or commit to selling/distributing its Cellebrite stake (medium probability).

10. Specifics of Korea’s Official Short-Selling Regulations, Announced This Morning

By Sanghyun Park, Clepsydra Capital

  • Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.
  • Today’s release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.
  • Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.