Korea / Special Situations, Clepsydra Capital

Sanghyun Park

I investigate special situations in Korea.

Korea / Special Situations

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

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

GC Cell - GC LabCell: Korean Biopharma Merger Trading Tight

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

Green Cross Merger Swap Summary & Arb Spread Status

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

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

Event-Driven

<h2>Stock swap arb spread</h2><p>The cancellation risk from the Green Cross Lab Cell/Green Cross Cell merger has disappeared. Although no official announcement has been made yet, a Green Cross Lab Cell company official said in an interview with the local media last Friday that the stock purchase cost was less than ₩150B, set as the ceiling.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/324/original/1.png?1633802584" class="editor-image img-responsive" data-smartkarma-image-id="234324"></figure></section><p><a href="https://n.news.naver.com/article/243/0000017006" target="_blank" rel="noopener">The link to this news report by "The Economist" is here.</a></p><p>The appraisal rights exercise period was September 13 to October 4 for Green Cross Lab Cell (the acquirer) and Green Cross Cell (the target company).</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Schedule"}' data-sheets-note="Sang Hyun Park: We have to buy shares until BOD+1 to be eligible to receive stock purchase rights. We then have to notify our dissenting opinion until the end of dissenting opinion notice period.">Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase right exercise"}'><strong>Stock purchase right exercise begins</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"2020. 09. 13 ~ 10. 04"}'><strong>2021. 09. 13</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'><strong>Stock purchase right exercise ends</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44147}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'><strong>2021. 10. 04</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The exercise prices are ₩103,244 for Green Cross Lab Cell and ₩41,163 for Green Cross Cell. The share prices had consistently been substantially below the exercise prices, making many arb traders worry about the cancellation. But despite a decent spread (3~7%) throughout the exercise period, it turns out that the company managed to keep it below the threshold that may trigger the cancellation.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Swap overview"}'>Appraisal rights exercise overview</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase ceiling condition"}'><strong>Stock purchase ceiling condition</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"If exceeds for both combined"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>If the total cost exceeds</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Amount"}'><strong>- Ceiling amount for both companies combined</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":150}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩150.0B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price - Green Cross Lab Cell Corp"}' data-sheets-formula='="Exercise price - "&amp;R[-11]C[1]'>Exercise price - Green Cross Lab Cell Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":103244}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩103,244</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price - Green Cross Cell Corp"}' data-sheets-formula='="Exercise price - "&amp;R[-9]C[1]'>Exercise price - Green Cross Cell Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":41163}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩41,163</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread - stock purchase"}'>Spread - stock purchase</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Acquirer"}'>Acquirer</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Target company"}'>Target company</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'><strong>Price on the last trading day of the appraisal rights exercise period (October 1)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":98200}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Status!R[-9]C[1]"><strong>₩98,200</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":38150}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Status!R[-9]C[1]"><strong>₩38,150</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price"}'>Exercise price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":103244}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":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='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-17]C[-1]">₩41,163</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transfer income tax"}'>Transfer income tax</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2220.68}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[16]C[0]/R[9]C[0]">₩2,221</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":937.86}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[16]C[0]/R[9]C[0]">₩938</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Shares"}'>- Shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='{"1":2,"2":"#,##0"}' data-sheets-formula="=R[8]C[0]">10,000</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='{"1":2,"2":"#,##0"}' data-sheets-formula="=R[8]C[0]">10,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Tax-adj. exercise price"}'>Tax-adj. exercise price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":101023.32}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]-R[-2]C[0]">₩101,023</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":40225.14}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]-R[-2]C[0]">₩40,225</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread"}'><strong>Spread</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0287507128309573}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-1]C[0]-R[-5]C[0])/R[-5]C[0]"><strong>2.88%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.05439423328964612}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-1]C[0]-R[-5]C[0])/R[-5]C[0]"><strong>5.44%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>The current swap arb spread is 1.99%. As the possibility of a merger increased, the swap spread was gradually revised down. Nevertheless, we were able to obtain an arb spread of close to 5% by mid-September, so we would have been able to secure decent profits if we started arb trading at this time.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap gain"}'>Swap gain</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Green Cross Lab Cell Corp"}' data-sheets-formula="=Terms!R[2]C[0]">Green Cross Lab Cell Corp</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Green Cross Cell Corp"}' data-sheets-formula="=Terms!R[5]C[-1]"><div><div>Green Cross Cell Corp</div></div></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":92900}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula='=googlefinance(Terms!R[2]C[0], "price")'>₩92,900</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":36650}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula='=googlefinance(Terms!R[5]C[-1], "price")'>₩36,650</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap price"}'>Swap price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":102882}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩102,882</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":41395}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩41,395</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap ratio"}'>Swap ratio</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":0.40235415330184093}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-1]C[1]/R[-1]C[0]">0.4023542</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price for 100 shares of the target company"}'><strong>Price for 100 shares of the target company</strong></td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":3665000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[1]*100"><strong>₩3,665,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Number of new shares of the acquiring company"}'>Number of 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='{"1":2,"2":"#,##0.0000000","3":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"}'><strong>Value of the new shares at the current price</strong></td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":3737870.0841741026}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-1]C[0]*R[-5]C[0]"><strong>₩3,737,870</strong></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":0.019882696909714226}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-1]C[0]-R[-3]C[0])/R[-3]C[0]"><strong>1.99%</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><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/325/original/image_92664529421633803241243.png?1633803242" class="editor-image img-responsive" data-smartkarma-image-id="234325"></figure><div class="content-highlight"><ul>
<li><strong>There are still opportunities for arb trade. We can immediately execute arb trading if sufficient spread occurs before the Green Cross Cell trading suspension (October 28).</strong></li>
<li><strong>However, it is uncertain whether we will see a spread of more than 4% again from now as the cancellation risk, which was the only risk of this event, disappeared.</strong></li>
<li><strong>Still, it seems worthwhile to keep an eye on the spread movement until the trading suspension date.</strong></li>
</ul></div><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Schedule"}' data-sheets-note="Sang Hyun Park: We have to buy shares until BOD+1 to be eligible to receive stock purchase rights. We then have to notify our dissenting opinion until the end of dissenting opinion notice period.">Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension (only Green Cross Cell)"}'><strong>Trade suspension begins (only for Green Cross Cell)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"2020. 10. 28 ~ 11. 11"}'><strong>2021. 10. 28</strong></td>
</tr>
<tr>
<td><strong>Trade suspension begins (only for Green Cross Cell) </strong></td>
<td style="text-align: right;"><strong>2021. 11. 11 </strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44147}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 11. 12</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

Stock swap arb spreadThe cancellation risk from the Green Cross Lab Cell/Green Cross Cell merger has disappeared. Although no official announcement has been made yet, a Green Cross Lab Cell company official said in an interview with the local media last Friday that the stock purchase cost was less than ₩150B, set as the ceiling.The link to this news report by "The Economist" is here.The appraisal rights exercise period was September 13 to October 4 for Green Cross Lab Cell (the acquirer) and Green Cross Cell (the target company).





Schedule

Stock purchase right exercise begins
2021. 09. 13


Stock purchase right exercise ends
2021. 10. 04

Source: DART

The exercise prices are ₩103,244 for Green Cross Lab Cell and ₩41,163 for Green Cross Cell. The share prices had consistently been substantially below the exercise prices, making many arb traders worry about the cancellation. But despite a decent spread (3~7%) throughout the exercise period, it turns out that the company managed to keep it below the threshold that may trigger the cancellation.





Appraisal rights exercise overview

Stock purchase ceiling condition
If the total cost exceeds


- Ceiling amount for both companies combined
₩150.0B


Exercise price - Green Cross Lab Cell Corp
₩103,244


Exercise price - Green Cross Cell Corp
₩41,163

Source: DART









Spread - stock purchase
Acquirer
Target company


Price on the last trading day of the appraisal rights exercise period (October 1)
₩98,200
₩38,150


Exercise price
₩103,244
₩41,163


Transfer income tax
₩2,221
₩938


- Shares
10,000
10,000


Tax-adj. exercise price
₩101,023
₩40,225


Spread
2.88%
5.44%

Source: DART &amp; KRX

The current swap arb spread is 1.99%. As the possibility of a merger increased, the swap spread was gradually revised down. Nevertheless, we were able to obtain an arb spread of close to 5% by mid-September, so we would have been able to secure decent profits if we started arb trading at this time.







Swap gain
Green Cross Lab Cell Corp
Green Cross Cell Corp


Current price
₩92,900
₩36,650


Swap price
₩102,882
₩41,395


Swap ratio
0.4023542


Price for 100 shares of the target company
₩3,665,000


Number of new shares of the acquiring company
40.2354153


Value of the new shares at the current price
₩3,737,870


Swap gain
1.99%

Source: DART &amp; KRX


There are still opportunities for arb trade. We can immediately execute arb trading if sufficient spread occurs before the Green Cross Cell trading suspension (October 28).
However, it is uncertain whether we will see a spread of more than 4% again from now as the cancellation risk, which was the only risk of this event, disappeared.
Still, it seems worthwhile to keep an eye on the spread movement until the trading suspension date.






Schedule

Trade suspension begins (only for Green Cross Cell)
2021. 10. 28


Trade suspension begins (only for Green Cross Cell) 
2021. 11. 11 


Listing
2021. 11. 12

Source: DART



GCラボセル合併：10月27日のスワップスプレッドとKOSDAQ 150リバランスのための多段階アービトラージ設定