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

LG Corp Post-Spinoff NAV Update & Relisting Day Trade Approach

LG Corp/LX Holdings: Official Base Prices & Index Calculation Timeline & Treatment Clarification

LG Corp: Block Deal Concern Causes an Even Harsher Correction

LG Holdings Post-Spinoff NAV Discounts & Stub Synthetic Pair Trading

F&F Spinoff Relisting: KOSPI200/MSCI Index Treatments & Corporate Action Schedule

Korean Spinoffs Trade Ideas Amid Trade Suspension on April 29

Gravity Works As WeWork Doesn't; Now Plan B

Clepsydra Capital

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

Event-Driven

<p><strong>This post is a detailed walkthrough of the LG Corp spinoff relisting.</strong></p><p><strong>It doesn't include any investment recommendation or view.</strong></p><hr><h2>Split ratio &amp; per share allocation</h2><p>The split ratio was fixed in advance based on the most recent financials before the board resolution on November 26 last year. So the split ratio calculation used the 3Q20 financials.</p><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":"3Q 2020"}'>3Q 2020</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Before"}'>Pre-split</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Corp"}'>LG Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LX Holdings"}'>LX Holdings</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Assets"}'>Assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10692.9}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩10,692.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9779.8}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩9,779.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":913.3}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩913.3B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Liabilities"}'>Liabilities</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":393.4}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩393.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":390.9}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩390.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.5}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩2.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Equity"}'><strong>Equity (net asset)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10299.5}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩10,299.5B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":9388.9}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩9,388.9B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":910.8}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩910.8B</strong></td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>We got the spinoff ratio as a spinoff net asset over the pre-split total net asset, including the treasury shares. This calculation spits out <strong>0.0884121 for LX Holdings</strong>. Subsequently, <strong>LG Corp</strong> gets <strong>0.9115879</strong>, which is 1 - LX Holdings.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="3" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Detailed calculation of split ratio"}'>Detailed calculation of the split ratio</td></tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"LX Holdings equity (net asset)"}'><strong>LX Holdings equity (net asset)</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":910.812100447}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩910.8B</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":2,"2":"A"}'><strong>A</strong></td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Pre-splilt net asset"}'>Pre-split equity (net asset)</td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":10299.504916112}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩10,299.5B</td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":2,"2":"B"}'>B</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Pre-split treasury shares"}'>Pre-split treasury shares</td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":2.385112284}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩2.4B</td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":2,"2":"C"}'>C</td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Split ratio for LX Holdings"}'><strong>The split ratio for LX Holdings</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":0.08841213582521741}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-3]C[0]/(R[-2]C[0]+R[-1]C[0])"><strong>0.0884121</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":2,"2":"D = A / (B + C)"}'><strong>D = A / (B + C)</strong></td>
</tr>
<tr>
<td style="width: 227.273px;" data-sheets-value='{"1":2,"2":"Split ratio for LG Corp"}'><strong>The split ratio for LG Corp</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":3,"3":0.9115878641747825}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=1-R[-2]C[0]"><strong>0.9115879</strong></td>
<td style="text-align: right; width: 227.273px;" data-sheets-value='{"1":2,"2":"1 - D"}'><strong>1 - D</strong></td>
</tr>
<tr><td colspan="3" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>We basically apply the split ratio to the pre-split total shares to get the total shares of each company, both ordinary and 1P. We have to be careful here. <strong>LX Holdings underwent a 5-for-1 stock split</strong>. So, we have to multiply it by 5. Here are the final results for both companies' ordinary and preferred shares.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td style="width: 260.909px;" data-sheets-value='{"1":2,"2":"Detailed calculation of split ratio"}'>Total shares &amp; per-share allocation</td>
<td style="text-align: right; width: 142.727px;" data-sheets-value='{"1":2,"2":"Ordinary"}'>Ordinary</td>
<td style="text-align: right; width: 117.273px;" data-sheets-value='{"1":2,"2":"1P"}'>1P</td>
<td style="text-align: right; width: 140px;" data-sheets-value='{"1":2,"2":"Per-share allocation"}'>Per-share allocation</td>
</tr>
<tr>
<td style="width: 260.909px;" data-sheets-value='{"1":2,"2":"Pre-split"}'>Pre-split</td>
<td style="text-align: right; width: 142.727px;" data-sheets-value='{"1":3,"3":172557131}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>172,557,131</td>
<td style="text-align: right; width: 117.273px;" data-sheets-value='{"1":3,"3":3314677}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>3,314,677</td>
<td style="text-align: right; width: 140px;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0","3":1}'>-</td>
</tr>
<tr>
<td style="width: 260.909px;" data-sheets-value='{"1":2,"2":"LG Corp"}'><strong>LG Corp</strong></td>
<td style="text-align: right; width: 142.727px;" data-sheets-value='{"1":3,"3":157300993}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=CEILING.MATH(R[-1]C[0]*R[-5]C[0], 16)+1"><strong>157,300,993</strong></td>
<td style="text-align: right; width: 117.273px;" data-sheets-value='{"1":3,"3":3021620.326859276}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-1]C[0]*R[-5]C[-1]+1"><strong>3,021,620</strong></td>
<td style="text-align: right; width: 140px;" data-sheets-value='{"1":3,"3":0.9115878641747825}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-5]C[-2]"><strong>0.9115879</strong></td>
</tr>
<tr>
<td style="width: 260.909px;" data-sheets-value='{"1":2,"2":"LX Holdings"}'>LX Holdings</td>
<td style="text-align: right; width: 142.727px;" data-sheets-value='{"1":3,"3":15256144.503581833}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-2]C[0]*R[-8]C[0]">15,256,145</td>
<td style="text-align: right; width: 117.273px;" data-sheets-value='{"1":3,"3":293057.6}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=ROUNDDOWN(R[-2]C[0]*R[-8]C[-1], 1)">293,058</td>
<td style="text-align: right; width: 140px;" data-sheets-value='{"1":3,"3":0.44206067912608704}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-7]C[-2]">-</td>
</tr>
<tr>
<td style="width: 260.909px;" data-sheets-value='{"1":2,"2":" - 5 for 1 stock split"}'><strong>- 5 for 1 stock split</strong></td>
<td style="text-align: right; width: 142.727px;" data-sheets-value='{"1":3,"3":76280690}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=Floor.Math(R[-1]C[0]*5, 5)-30"><strong>76,280,690</strong></td>
<td style="text-align: right; width: 117.273px;" data-sheets-value='{"1":3,"3":1465285}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=Floor.Math(R[-1]C[0]*5, 5)"><strong>1,465,285</strong></td>
<td style="text-align: right; width: 140px;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":2,"2":"#,##0.0","3":1}'><strong>0.4420607</strong></td>
</tr>
<tr><td colspan="4" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p><strong>In the end, your one share of the pre-split LG Corp will be converted into 0.9115879 shares of LG Corp ordinary and 1P and 0.4420607 shares of LX Holdings ordinary and 1P.</strong></p>

This post is a detailed walkthrough of the LG Corp spinoff relisting.It doesn't include any investment recommendation or view.Split ratio &amp; per share allocationThe split ratio was fixed in advance based on the most recent financials before the board resolution on November 26 last year. So the split ratio calculation used the 3Q20 financials.








3Q 2020
Pre-split
LG Corp
LX Holdings


Assets
₩10,692.9B
₩9,779.8B
₩913.3B


Liabilities
₩393.4B
₩390.9B
₩2.5B


Equity (net asset)
₩10,299.5B
₩9,388.9B
₩910.8B

Source: DART

We got the spinoff ratio as a spinoff net asset over the pre-split total net asset, including the treasury shares. This calculation spits out 0.0884121 for LX Holdings. Subsequently, LG Corp gets 0.9115879, which is 1 - LX Holdings.






Detailed calculation of the split ratio

LX Holdings equity (net asset)
₩910.8B
A


Pre-split equity (net asset)
₩10,299.5B
B


Pre-split treasury shares
₩2.4B
C


The split ratio for LX Holdings
0.0884121
D = A / (B + C)


The split ratio for LG Corp
0.9115879
1 - D

Source: DART

We basically apply the split ratio to the pre-split total shares to get the total shares of each company, both ordinary and 1P. We have to be careful here. LX Holdings underwent a 5-for-1 stock split. So, we have to multiply it by 5. Here are the final results for both companies' ordinary and preferred shares.








Total shares &amp; per-share allocation
Ordinary
1P
Per-share allocation


Pre-split
172,557,131
3,314,677
-


LG Corp
157,300,993
3,021,620
0.9115879


LX Holdings
15,256,145
293,058
-


- 5 for 1 stock split
76,280,690
1,465,285
0.4420607

Source: DART

In the end, your one share of the pre-split LG Corp will be converted into 0.9115879 shares of LG Corp ordinary and 1P and 0.4420607 shares of LX Holdings ordinary and 1P.

LG Corp

LG Corp Spinoff Relisting Walkthrough