Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Green Cross Merger Got Shareholder Approval (Both Companies): Arb Spread at 5%, I'd Trade It

GC Lab Cell Merger: Multi-Staged Arb Setups for Swap Spreads & KOSDAQ 150 Rebalancing on Oct 27

Green Cross Lab Cell: Short-Selling Entry Timing Ahead of New Shares Listing on Nov 17

Green Cross Merger Swap Summary & Arb Spread Status

GC Cell - GC LabCell: Korean Biopharma Merger Trading Tight

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>Green Cross Lab Cell (the acquiring company) &amp; Green Cross Cell Corp (the target company) are still in the middle of the stock swap process. At the current prices, the swap spread stands at 4.95%.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap gain"}'>Swap gain</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Green Cross Lab Cell Corp"}' data-sheets-formula="=Terms!R[2]C[0]">Green Cross Lab Cell Corp</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Green Cross Cell Corp"}' data-sheets-formula="=Terms!R[5]C[-1]"><div><div>Green Cross Cell Corp</div></div></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'><strong>Current price</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":101200}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula='=googlefinance(Terms!R[2]C[0], "price")'><strong>₩101,200</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":38900}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula='=googlefinance(Terms!R[5]C[-1], "price")'><strong>₩38,900</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap price"}'><strong>Swap price</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":102882}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩102,882</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":41395}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'><strong>₩41,395</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap ratio"}'>Swap ratio</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":0.40235415330184093}' data-sheets-numberformat='[null,2,"#,##0.0000000",1]' data-sheets-formula="=R[-1]C[1]/R[-1]C[0]">0.4023542</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price for 100 shares of the target company"}'>100 shares of the target company</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":3890000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-3]C[1]*100">₩3,890,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Number of new shares of the acquiring company"}'>New shares of the acquiring company</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":40.2354153301841}' data-sheets-numberformat='[null,2,"#,##0.0000000",1]' data-sheets-formula="=100*R[-2]C[0]">40.2354153</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of the new shares at the current price"}'> - Value at the current price</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":4071824.0314146304}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*R[-5]C[0]">₩4,071,824</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap gain"}'><strong>Swap gain</strong></td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":0.04674139625054765}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-3]C[0])/R[-3]C[0]"><strong>4.95%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>The swap spread soared to 8.21% last Friday and stayed at 8% this Monday. And today it is again approaching 5%.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/225/992/original/image_43107879131629868820922.png?1629868822" class="editor-image img-responsive" data-smartkarma-image-id="225992"></figure><p>This wide swap spread was caused by the fact that the share price decline of Green Cross Cell last week was significantly greater than that of Green Cross Lab Cell. This can be seen as an increase in price disparity following the harsher stock price correction of the entire KOSDAQ market compared with the KOSPI market.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/225/993/original/Screen+Shot+2021-08-25+at+1.24.19+AM.png?1629869082" class="editor-image img-responsive" data-smartkarma-image-id="225993"></figure></section><p>However, we aren't seeing active arb trades yet. This is mainly because both companies' appraisal rights exercise prices are higher than the current prices. In particular, Green Cross Cell's exercise price is 4.68% higher than the current price. So yes, this means we have a real concern about the cancellation.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread - stock purchase"}'>Spread - stock purchase</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Acquirer"}'>Green Cross Lab Cell Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Target company"}'>Green Cross Cell Corp</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":101200}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-29]C[0]">₩101,200</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":38900}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-29]C[0]">₩38,900</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price"}'>Exercise price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":103244}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=Terms!R[-18]C[0]">₩103,244</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":41163}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=Terms!R[-17]C[-1]">₩41,163</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transfer income tax"}'>Transfer income tax</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":394.68}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[16]C[0]/R[9]C[0]">₩395</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":442.86}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[16]C[0]/R[9]C[0]">₩443</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Shares"}'>- Shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='[null,2,"#,##0"]' data-sheets-formula="=R[8]C[0]">10,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='[null,2,"#,##0"]' data-sheets-formula="=R[8]C[0]">10,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Tax-adj. exercise price"}'>Tax-adj. exercise price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":102849.32}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-3]C[0]-R[-2]C[0]">₩102,849</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":40720.14}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-3]C[0]-R[-2]C[0]">₩40,720</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread"}'><strong>Spread</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.01629762845849809}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-34]C[0])/R[-34]C[0]"><strong>1.63%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.04679023136246785}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-34]C[0])/R[-34]C[0]"><strong>4.68%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Transfer income tax - stock purchase"}'>Transfer income tax</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Acquirer"}'>Green Cross Lab Cell Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Target company"}'>Green Cross Cell Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Note"}'>Note</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Initial purchase amount"}'>Initial purchase amount</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1012000000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[1]C[0]*R[2]C[0]">₩1,012,000,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":389000000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[1]C[0]*R[2]C[0]">₩389,000,000</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A = B × C"}'>A = B × C</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Price"}'>- Price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":101200}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-39]C[0]">₩101,200</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":38900}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-39]C[0]">₩38,900</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Shares"}'>- Shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='[null,2,"#,##0"]'>10,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='[null,2,"#,##0"]'>10,000</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"C"}'>C</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transaction amount"}'>Transaction amount</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1032440000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[1]C[0]*R[-1]C[0]">₩1,032,440,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":411630000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[1]C[0]*R[-1]C[0]">₩411,630,000</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"D = E × C"}'>D = E × C</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Price"}'>- Price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":103244}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-12]C[0]">₩103,244</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":41163}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-12]C[0]">₩41,163</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"E"}'>E</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Securities transaction tax"}'>Securities transaction tax</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=If((R[-1]C[0]-R[-5]C[0])*R[1]C[0]&gt;0, (R[-1]C[0]-R[-5]C[0])*R[1]C[0], 0)">₩0</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=If((R[-1]C[0]-R[-5]C[0])*R[1]C[0]&gt;0, (R[-1]C[0]-R[-5]C[0])*R[1]C[0], 0)">₩0</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"F = D × G"}'>F = D × G</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Rate"}'>- Rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.005}' data-sheets-numberformat='[null,3,"0.00%",1]'>0.50%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.005}' data-sheets-numberformat='[null,3,"0.00%",1]'>0.50%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"G"}'>G</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transfer income basic deduction"}'>Basic deduction</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2500000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩2,500,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2500000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]'>₩2,500,000</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"H"}'>H</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transfer income tax base"}'>Transfer income tax base</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":17940000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=if(R[-5]C[0]-R[-8]C[0]-R[-3]C[0]-R[-1]C[0]&gt;0, R[-5]C[0]-R[-8]C[0]-R[-3]C[0]-R[-1]C[0], 0)">₩17,940,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":20130000}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=if(R[-5]C[0]-R[-8]C[0]-R[-3]C[0]-R[-1]C[0]&gt;0, R[-5]C[0]-R[-8]C[0]-R[-3]C[0]-R[-1]C[0], 0)">₩20,130,000</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"I = D - A - F - H"}'>I = D - A - F - H</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transfer income tax"}'>Transfer income tax</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3946800}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*R[1]C[0]">₩3,946,800</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4428600}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*R[1]C[0]">₩4,428,600</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"J = I × K"}'>J = I × K</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Rate"}'>- Rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.22}' data-sheets-numberformat='[null,3,"0.00%",1]'>22.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.22}' data-sheets-numberformat='[null,3,"0.00%",1]'>22.00%</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"K"}'>K</td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table>

Green Cross Lab Cell (the acquiring company) &amp; Green Cross Cell Corp (the target company) are still in the middle of the stock swap process. At the current prices, the swap spread stands at 4.95%.







Swap gain
Green Cross Lab Cell Corp
Green Cross Cell Corp


Current price
₩101,200
₩38,900


Swap price
₩102,882
₩41,395


Swap ratio
0.4023542


100 shares of the target company
₩3,890,000


New shares of the acquiring company
40.2354153


 - Value at the current price
₩4,071,824


Swap gain
4.95%

Source: DART &amp; KRX

The swap spread soared to 8.21% last Friday and stayed at 8% this Monday. And today it is again approaching 5%.This wide swap spread was caused by the fact that the share price decline of Green Cross Cell last week was significantly greater than that of Green Cross Lab Cell. This can be seen as an increase in price disparity following the harsher stock price correction of the entire KOSDAQ market compared with the KOSPI market.However, we aren't seeing active arb trades yet. This is mainly because both companies' appraisal rights exercise prices are higher than the current prices. In particular, Green Cross Cell's exercise price is 4.68% higher than the current price. So yes, this means we have a real concern about the cancellation.







Spread - stock purchase
Green Cross Lab Cell Corp
Green Cross Cell Corp


Current price
₩101,200
₩38,900


Exercise price
₩103,244
₩41,163


Transfer income tax
₩395
₩443


- Shares
10,000
10,000


Tax-adj. exercise price
₩102,849
₩40,720


Spread
1.63%
4.68%

Source: DART &amp; KRX










Transfer income tax
Green Cross Lab Cell Corp
Green Cross Cell Corp
Note


Initial purchase amount
₩1,012,000,000
₩389,000,000
A = B × C


- Price
₩101,200
₩38,900
B


- Shares
10,000
10,000
C


Transaction amount
₩1,032,440,000
₩411,630,000
D = E × C


- Price
₩103,244
₩41,163
E


Securities transaction tax
₩0
₩0
F = D × G


- Rate
0.50%
0.50%
G


Basic deduction
₩2,500,000
₩2,500,000
H


Transfer income tax base
₩17,940,000
₩20,130,000
I = D - A - F - H


Transfer income tax
₩3,946,800
₩4,428,600
J = I × K


- Rate
22.00%
22.00%
K

Source: DART &amp; KRX



Green Cross Stock Swap: A 5% Spread Is a Rare Opportunity

Green Cross LabCell

Green Cross Stock Swap: A 5% Spread Is a Rare Opportunity