Event-Driven and Index Rebalance

Weekly Top Ten Event-Driven and Index Rebalance – Jun 2, 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. Cash-Rich Exedy (7278) Sees Huge Offering Offset by Huge Buyback – Watch For Short-Term Games

By Travis Lundy, Quiddity Advisors

  • Toyota equity affiliate Aisin (7259 JP) last September said it would sell all its crossholdings. That now includes a 36.5% stake in Exedy Corp (7278 JP)
  • Today, they announced an offering of all the shares (when including the greenshoe). That is nearly ¥50bn. That is offset by a ¥15bn buyback which could reduce the offering size.
  • Games may be played, but there is considerable accretion, and Exedy will see higher float and still-high net cash.

2. TIP Customized Taiwan Select High Dividend Index Rebalance Preview: AUM Jump & HUGE Trade

By Brian Freitas, Periscope Analytics

  • The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 209bn (US$6.5bn).
  • There could be 14 changes for the ETF in June with an estimated one-way turnover of around 40% and a round-trip trade of around US$5bn.
  • The potential adds have outperformed the potential deletes over the last couple of months and there could be more to go heading into announcement and implementation.

3. Infocom (4348 JP) – The Meaning of ‘Binding Bids’ and ‘¥250bn’

By Travis Lundy, Quiddity Advisors

  • A variety of articles of recent from private media sources have suggested that Teijin Ltd (3401 JP) has its 55% stake in Infocom Corp (4348 JP) up for auction. 
  • According to earlier articles, binding Second Round bids were due last week. According to an article out late last week, binding bids have been made, with some “around ¥250bn.”
  • What that means for price may depend on what the “around ¥250bn” means. A brief exploration below. 

4. Yuanta Taiwan Div+ ETF Rebalance Preview: 5 Changes as Names Move Around; US$2.35bn Round-Trip Trade

By Brian Freitas, Periscope Analytics

  • With the review period now complete, there could be 5 changes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in June.
  • Price changes and changes to dividend estimates have led to names dropping off the list of potential adds and deletes over the last week.
  • Constituent changes, capping and funding flows will lead to a one-way turnover of 12.7% and a one-way trade of US$1.17bn. There are 12 stocks with over 4x ADV to trade.

5. Infocom (4348 JP) – Reports of an Exclusive Negotiation May Give Hints

By Travis Lundy, Quiddity Advisors

6. Taiwan Top 50 ETF Rebalance Preview: Asia Vital Components (3017 TT) In Back-To-Back Inclusion?

By Brian Freitas, Periscope Analytics

7. S&P/​​​​​​​​​ASX Index Rebalance Preview: Regular & Ad Hoc Changes in June

By Brian Freitas, Periscope Analytics

  • With the review period complete, we take a look at the potential index changes at the June rebalance as well as potential index inclusions due to M&A.
  • Timing is key for the ad hoc inclusions to the S&P/ASX 200 (AS51 INDEX) with an ad hoc inclusion being announced prior to the regular announcement.
  • Passive trackers will need to buy 1.3-27x ADV on the expected adds and have 0.8-4.7x ADV to sell on the expected deletes. Shorts have built up on the potential deletes.

8. Exedy (7278) Huge Offering Resized – Watch the Dynamics Here

By Travis Lundy, Quiddity Advisors

  • On Monday 27 May, Aisin (7259 JP) announced an offering to sell ALL of its 36+% stake in equity affiliate Exedy Corp (7278 JP) for likely ¥40bn+. 
  • Exedy announced a big buyback to go with it. It bought back 30% of the total on Weds morning, and that reduced the size of the offer. 
  • I had expected “short-term games” but we haven’t really had them. Which is a bit weird. This update shows the details and dynamics (they differ).

9. KRX Announces Final Version of Value-Up Disclosure Guidelines Alongside Dedicated Website Launch

By Sanghyun Park, Clepsydra Capital

  • Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
  • Finalized version similar to draft, with added content requested by listed companies, like R&D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry’s plan in July.
  • KRX keeps a screening framework for the index akin to March’s criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.

10. Kansai Paint (4613) – Going Hard with a BIG Buyback and More Capital Moves Beyond

By Travis Lundy, Quiddity Advisors

  • 24mos ago, Kansai Paint (4613 JP) announced a new MTMP, a large buyback, and plans to unwind cross-holdings. Big. 15mos ago a large secondary offering kicked off the festivities.
  • Key was Toyota sold. Then KP could sell its Toyota shares – two-thirds of its cross-holdings. The offering was one to buy. A buyback followed. KP vs Nippon Paint doubled.
  • KP offered a CB recently with the delta hedge done by TN-3. Now there is a HUGE new buyback. Really big. This gets rid of more cross-holders. And there’s more.