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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

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

Event-Driven

Bobcat Company specializes in design, manufacture, marketing and distribution of compact equipment for construction, rental, landscaping, agriculture, grounds maintenance, government, utility, industry and mining.

<ul>
<li>During Kim Byung-hwan's hearing, he acknowledged market concerns about the Doosan merger, increasing skepticism about Doosan's ability to maintain the original merger ratio.</li>
<li>Calculating Bobcat's net asset value using the net asset value method yields approximately ₩6.1T, derived from ₩5.95T in year-end equity plus ₩0.13T in adjustments.</li>
<li>Reassess arb trading opportunities; with no short hedge for Robotics, consider an outright long position in Bobcat if its swap price is revised and the spread widens.</li>
</ul>


During Kim Byung-hwan's hearing, he acknowledged market concerns about the Doosan merger, increasing skepticism about Doosan's ability to maintain the original merger ratio.
Calculating Bobcat's net asset value using the net asset value method yields approximately ₩6.1T, derived from ₩5.95T in year-end equity plus ₩0.13T in adjustments.
Reassess arb trading opportunities; with no short hedge for Robotics, consider an outright long position in Bobcat if its swap price is revised and the spread widens.


Robotics+Bobcat Merger: Merger Ratio Revision Possibility & Arb Spread Recalculations

Korea Stock Exchange Kospi Index / Event-Driven

The KOSPI Index is a capitalization-weighted index of all common shares on the Korean Stock Exchanges. The Index was developed with a base value of 100 as of January 4, 1980. Note: The preferred shares are excluded in calculating the KOSPI Index from June 14, 2002. 

Korea Stock Exchange Kospi Index (KOSPI INDEX)

<ul>
<li>The major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.</li>
<li>The KOSPI 200's continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.</li>
<li>The first-tier market's entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.</li>
</ul>


The major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.
The KOSPI 200's continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.
The first-tier market's entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.


KRX's Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations

Samsung C&T Corporation conducts diversified business support services and resort operation activities. The Company offers a range of services in areas including clothing retail, construction, energy, real estate, food service, and resort accommodations. Samsung C&T also operates a resort with amusement rides, a zoo, water park, golf clubs, and restaurants.

<ul>
<li>Maximizing Lee Jae-yong's dividend income is crucial, making Samsung SDS's ₩5.5T cash assets key, thus prompting the merger of Samsung C&amp;T and Samsung SDS's BPO division.</li>
<li>With no legal risks for Lee Jae-yong, Samsung C&amp;T needs the merger to increase assets and avoid forced holding company conversion, making the acquisition of Samsung SDS’s BPO division necessary.</li>
<li>We should target a setup for likely appraisal rights for C&amp;T. Monitor and capture the spread between the stock price and appraisal rights exercise price.</li>
</ul>


Maximizing Lee Jae-yong's dividend income is crucial, making Samsung SDS's ₩5.5T cash assets key, thus prompting the merger of Samsung C&amp;T and Samsung SDS's BPO division.
With no legal risks for Lee Jae-yong, Samsung C&amp;T needs the merger to increase assets and avoid forced holding company conversion, making the acquisition of Samsung SDS’s BPO division necessary.
We should target a setup for likely appraisal rights for C&amp;T. Monitor and capture the spread between the stock price and appraisal rights exercise price.


Examining Market Interest in the Potential Samsung C&T and SDS Restructuring

KT Corporation provides telecommunication services including local, long distance, and international calling, satellite communication, data transmission, and wireless telephone services in South Korea.  The Company also offers network portal and high-speed Internet access services using asymmetric digital subscriber lines (ADSLs).

<ul>
<li>KT's foreign room has been exhausted due to value-up trading inflows, NPS selling shares, and KT canceling treasury stocks.</li>
<li>Hyundai Motor may sell 0.5% of its KT stake, likely to overseas investors. KT's 700,000 share cancellation will lower foreign ownership to the low-4% range, possibly below 3.75% by November.</li>
<li>Focus on the stock price surge from ETF recall requests around the effective date, and note that passive outflow corrections typically occur afterward.</li>
</ul>


KT's foreign room has been exhausted due to value-up trading inflows, NPS selling shares, and KT canceling treasury stocks.
Hyundai Motor may sell 0.5% of its KT stake, likely to overseas investors. KT's 700,000 share cancellation will lower foreign ownership to the low-4% range, possibly below 3.75% by November.
Focus on the stock price surge from ETF recall requests around the effective date, and note that passive outflow corrections typically occur afterward.


Reasons Why KT's Foreign Room Is Likely to Fall Below the 3.75% Cutoff Level

SK Innovation Co., Ltd. refines, markets, and distributes oil.  The Company produces a variety of petroleum products, such as gasoline, kerosene, liquefied petroleumgas (LPG), and diesel oil.  SK Energy also manufactures petrochemical p roducts, including paraxylene, synthetic resins, styrene monomer, and ethylene.

<ul>
<li>The merger ratio, not as unfavorable to SK Innovation as feared, shows SK Group acting cautiously amid political and regulatory scrutiny.</li>
<li>SK Inc.'s stake will drop to mid-60s; the 1.2x merger ratio for SK E&amp;S could positively affect SK Innovation's stock price short-term.</li>
<li>Persuading KKR is crucial. SK E&amp;S won't convert ₩3T in RCPS or grant appraisal rights, potentially leading KKR to consider litigation, a significant risk to the merger.</li>
</ul>


The merger ratio, not as unfavorable to SK Innovation as feared, shows SK Group acting cautiously amid political and regulatory scrutiny.
SK Inc.'s stake will drop to mid-60s; the 1.2x merger ratio for SK E&amp;S could positively affect SK Innovation's stock price short-term.
Persuading KKR is crucial. SK E&amp;S won't convert ₩3T in RCPS or grant appraisal rights, potentially leading KKR to consider litigation, a significant risk to the merger.


SK Innovation & SK E&S Merger Official Disclosure: Unexpected Merger Ratio