European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<div>
<div>
<h3>Trends</h3>
</div>
</div>
<div>
<p>Mixed picture, although discounts have generally widened across the European space.</p>
</div>
<div>
<div>
<h3>Interesting situations and trades</h3>
</div>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<p><a href="https://www.smartkarma.com/entities/carlsberg-a-s" target="_blank" data-smartkarma-citation="entities:22320:1" rel="noopener">Carlsberg A/S (CARLB DC)</a> B shares (with 1/10th of the voting rights of the A shares) are trading at a whopping 22.2% discount (25% by mid-April) vs. the A shares, demand for illiquid A shares seems to be the explanation. Maintain LONG B shares/short A shares on, if you can get hold of any A shares.</p>
</li>
<li>
<p><a href="https://www.smartkarma.com/entities/bayerische-motoren-werke-ag" target="_blank" data-smartkarma-citation="entities:21591:1" rel="noopener">Bayerische Motoren Werke AG (BMW GR)</a> exhibited a trend towards a reduction of the discount of preferred shares, until March 2020. The discount has suddenly tightened to 15.8% (vs. 22.1% by mid-April). The discount is approaching pre-Covid levels. Maintain long BMW prefs, short common shares on, with a target of a 12% discount.</p>
</li>
<li>
<p><a href="https://www.smartkarma.com/entities/fuchs-petrolub-se" target="_blank" data-smartkarma-citation="entities:21624:1" rel="noopener">Fuchs Petrolub SE (FPE GR)</a>'s preference shares premium seems to vary within a range, which is probably liquidity related. It is 21.4% (vs. 19.6% by mid-March and down from 29.4% by mid-February and 34.4% in my October report). With over 50% of the ordinary shares, the Fuchs family maintains the majority vote. They have never stated they would consolidate and pride to be the number 1 among the independent suppliers of lubricants.</p>
<p>Although there is no reason why the voting rights should be specially dear in Fuchs's case, voting rights are still valuable and neither the dividend advantage of the preferred shares nor their being members of several midcap indexes (Prime Standard/MDAX; STOXX Europe 600; DAXplus Familiy 30) justify the large premium, in my view. Maintain the trade long common/short prefs on, with a 10% target.</p>
</li>
<li>
<p><a href="https://www.smartkarma.com/entities/henkel-ag-co-kgaa" target="_blank" data-smartkarma-citation="entities:21646:1" rel="noopener">Henkel AG &amp; Co KGaA (HEN3 GR)</a> shows a long-term trend towards a reduction of the premium of the preferred shares. The premium has recently widened and is now 16.1% (vs. 14.9% by mid-April). Maintain the trade short prefs/long common shares with a 10% premium target.</p>
</li>
<li>
<p>Voting rights are valuable in a company like <a href="https://www.smartkarma.com/entities/volkswagen-ag" target="_blank" data-smartkarma-citation="entities:21738:1" rel="noopener">Volkswagen (VOW GR)</a>. Prefs discount had recently widened to erstwhile levels: 20.5% (vs. 16.6% by mid-April and 31.8% on 18 March, highest since November 2009). Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. That said, the ordinary shares are also liquid. The shareholder structure of Volkswagen is stable, and there seems to be no reason why the discount of the prefs should widen. Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. Volkswagen was considering a separate listing of its Porsche sports car brand in a deal that could boost its valuation, according to Bloomberg, but the company seems to have put those plans on ice. <a href="https://www.smartkarma.com/entities/traton-se" target="_blank" data-smartkarma-citation="entities:28140:1" rel="noopener">Traton SE (8TRA GR)</a>, a subsidiary majority owned by Volkswagen, is squeezing out the minorities (both ordinary and preferred shares) in <a href="https://www.smartkarma.com/entities/man-se" target="_blank" data-smartkarma-citation="entities:21670:1" rel="noopener">MAN SE (MAN GR).</a> Recommendation is<strong> long prefs/short ords</strong>, with the necessary health warning attached to any trading with Volkswagen share classes, as one can never be completely sure of the Porsche/Piech families' plans. Plus it can be executed in size.</p>
</li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/entities/danieli-c-officine-meccaniche" target="_blank" data-smartkarma-citation="entities:21177:1" rel="noopener">Danieli &amp; C. Officine Meccaniche (DAN IM)</a>:  the mandatory conversion and extraordinary dividend were approved on the shareholders meetings on 28 October. The conversion date is yet to be announced but expected soon. Since announcement, the adjusted spread has ranged between -5.48% and 7.69%. It is currently -2.22%. Long Danieli ords/short Danieli savings shares.</li>
<li>
<a href="https://www.smartkarma.com/entities/telecom-italia-sp-a" target="_blank" data-smartkarma-citation="entities:21075:1" rel="noopener">Telecom Italia Sp A (TIT IM)</a> savings shares are trading at a 7.9% premium to ordinary shares (vs. a  6% premium by mid-April). Challenging macro means that the financial privileges of the savings shares count. More importantly, the market may think of a conversion of savings into ords à la Buzzi Unicem or Danieli. Short savings/long ords.</li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<p><a href="https://www.smartkarma.com/entities/grifols-sa" target="_blank" data-smartkarma-citation="entities:21274:1" rel="noopener">Grifols SA (GRF SM)</a> B shares are trading at a 35.3% discount (vs. 36.1% by mid-April and 39.7% by mid-February), there is a trend towards the tightening of this discount since March 2020 lows. The Covid-related antitakeover provisions issued by the Spanish Government mean that the voting rights are less valuable now. Also, the Spanish government plans to introduce double voting rights for "loyal" shareholders (those who have kept the shares for at least two years). Moreover, the by-laws contain a poison pill that should significantly reduce the discount in case of a takeover attempt. The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade long B shares (traded on Nasdaq), short A shares (traded in Madrid). The target is a 27% discount. Please note there is FX risk, which can be hedged.</p>
</li>
<li>
<p>The current discount in <a href="https://www.smartkarma.com/entities/atlas-copco-ab" target="_blank" data-smartkarma-citation="entities:22282:1" rel="noopener">Atlas Copco AB (ATCOA SS)</a> B shares vs. A shares is 14.5% (vs. 13.8% by mid-April) and seems to be on a widening trend.</p>
</li>
<li>
<p>On 10 May, Industrivärden divested its entire holding of 44,334,933 class A shares in <a href="https://www.smartkarma.com/entities/ssab-ab" target="_blank" data-smartkarma-citation="entities:22492:1" rel="noopener">SSAB AB (SSABA SS)</a>. The divested shares represent 4.3% of the capital and 11.8% of the votes in SSAB. Industrivärden has been a long-term owner with a significant shareholding in SSAB since 1994. The reversal on the discount from June 2018 has no obvious explanation. The discount has widened to 7.2% (vs. 6.6% by mid-April). I would short B shares and go long A shares, with a 10% target.</p>
</li>
<li>
<p>The discount in <a href="https://www.smartkarma.com/entities/volvo-ab" target="_blank" data-smartkarma-citation="entities:22521:1" rel="noopener">Volvo AB (VOLVB SS)</a> B shares has widened and is now trading at a 2.6% discount to A shares (vs. 0.8% discount by mid-February). It is the highest level since January 2016.</p>
</li>
<li>
<p>The discount of non-voting <a href="https://www.smartkarma.com/entities/roche-holding-ag-77bd09c9-b0c2-45ea-98f1-6a7ca01dc9c5" target="_blank" data-smartkarma-citation="entities:27906:1" rel="noopener">Roche Holding AG (ROG SW)</a> shares has widened to 6.9% (vs. 5.1% by mid-April and 3.9% by mid-March), a level unreached since November 2011. The Hoffman family and related holds 45% of the voting rights (shareholder pooling agreement) whilst Novartis holds 33.3% of the voting rights.</p>
</li>
<li>
<p>The discount in <a href="https://www.smartkarma.com/entities/schroders-plc" target="_blank" data-smartkarma-citation="entities:22134:1" rel="noopener">Schroders PLC (SDR LN)</a> has tightened to 25.4% (vs. 27.4% by mid-April 30.6% by mid-March and 34.1% by mid-February). I would maintain long non-voting/short voting shares on.</p>
</li>
</ul>
</div>
<div>
<p>Please read on for table and charts.</p>
</div>



Trends



Mixed picture, although discounts have generally widened across the European space.



Interesting situations and trades





Carlsberg A/S (CARLB DC) B shares (with 1/10th of the voting rights of the A shares) are trading at a whopping 22.2% discount (25% by mid-April) vs. the A shares, demand for illiquid A shares seems to be the explanation. Maintain LONG B shares/short A shares on, if you can get hold of any A shares.


Bayerische Motoren Werke AG (BMW GR) exhibited a trend towards a reduction of the discount of preferred shares, until March 2020. The discount has suddenly tightened to 15.8% (vs. 22.1% by mid-April). The discount is approaching pre-Covid levels. Maintain long BMW prefs, short common shares on, with a target of a 12% discount.


Fuchs Petrolub SE (FPE GR)'s preference shares premium seems to vary within a range, which is probably liquidity related. It is 21.4% (vs. 19.6% by mid-March and down from 29.4% by mid-February and 34.4% in my October report). With over 50% of the ordinary shares, the Fuchs family maintains the majority vote. They have never stated they would consolidate and pride to be the number 1 among the independent suppliers of lubricants.
Although there is no reason why the voting rights should be specially dear in Fuchs's case, voting rights are still valuable and neither the dividend advantage of the preferred shares nor their being members of several midcap indexes (Prime Standard/MDAX; STOXX Europe 600; DAXplus Familiy 30) justify the large premium, in my view. Maintain the trade long common/short prefs on, with a 10% target.


Henkel AG &amp; Co KGaA (HEN3 GR) shows a long-term trend towards a reduction of the premium of the preferred shares. The premium has recently widened and is now 16.1% (vs. 14.9% by mid-April). Maintain the trade short prefs/long common shares with a 10% premium target.


Voting rights are valuable in a company like Volkswagen (VOW GR). Prefs discount had recently widened to erstwhile levels: 20.5% (vs. 16.6% by mid-April and 31.8% on 18 March, highest since November 2009). Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. That said, the ordinary shares are also liquid. The shareholder structure of Volkswagen is stable, and there seems to be no reason why the discount of the prefs should widen. Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. Volkswagen was considering a separate listing of its Porsche sports car brand in a deal that could boost its valuation, according to Bloomberg, but the company seems to have put those plans on ice. Traton SE (8TRA GR), a subsidiary majority owned by Volkswagen, is squeezing out the minorities (both ordinary and preferred shares) in MAN SE (MAN GR). Recommendation is long prefs/short ords, with the necessary health warning attached to any trading with Volkswagen share classes, as one can never be completely sure of the Porsche/Piech families' plans. Plus it can be executed in size.






Danieli &amp; C. Officine Meccaniche (DAN IM):  the mandatory conversion and extraordinary dividend were approved on the shareholders meetings on 28 October. The conversion date is yet to be announced but expected soon. Since announcement, the adjusted spread has ranged between -5.48% and 7.69%. It is currently -2.22%. Long Danieli ords/short Danieli savings shares.

Telecom Italia Sp A (TIT IM) savings shares are trading at a 7.9% premium to ordinary shares (vs. a  6% premium by mid-April). Challenging macro means that the financial privileges of the savings shares count. More importantly, the market may think of a conversion of savings into ords à la Buzzi Unicem or Danieli. Short savings/long ords.





Grifols SA (GRF SM) B shares are trading at a 35.3% discount (vs. 36.1% by mid-April and 39.7% by mid-February), there is a trend towards the tightening of this discount since March 2020 lows. The Covid-related antitakeover provisions issued by the Spanish Government mean that the voting rights are less valuable now. Also, the Spanish government plans to introduce double voting rights for "loyal" shareholders (those who have kept the shares for at least two years). Moreover, the by-laws contain a poison pill that should significantly reduce the discount in case of a takeover attempt. The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade long B shares (traded on Nasdaq), short A shares (traded in Madrid). The target is a 27% discount. Please note there is FX risk, which can be hedged.


The current discount in Atlas Copco AB (ATCOA SS) B shares vs. A shares is 14.5% (vs. 13.8% by mid-April) and seems to be on a widening trend.


On 10 May, Industrivärden divested its entire holding of 44,334,933 class A shares in SSAB AB (SSABA SS). The divested shares represent 4.3% of the capital and 11.8% of the votes in SSAB. Industrivärden has been a long-term owner with a significant shareholding in SSAB since 1994. The reversal on the discount from June 2018 has no obvious explanation. The discount has widened to 7.2% (vs. 6.6% by mid-April). I would short B shares and go long A shares, with a 10% target.


The discount in Volvo AB (VOLVB SS) B shares has widened and is now trading at a 2.6% discount to A shares (vs. 0.8% discount by mid-February). It is the highest level since January 2016.


The discount of non-voting Roche Holding AG (ROG SW) shares has widened to 6.9% (vs. 5.1% by mid-April and 3.9% by mid-March), a level unreached since November 2011. The Hoffman family and related holds 45% of the voting rights (shareholder pooling agreement) whilst Novartis holds 33.3% of the voting rights.


The discount in Schroders PLC (SDR LN) has tightened to 25.4% (vs. 27.4% by mid-April 30.6% by mid-March and 34.1% by mid-February). I would maintain long non-voting/short voting shares on.




Please read on for table and charts.


Liquid Universe of European Ordinary and Preferred Shares: May Report

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Capital Markets

Zhaoke Ophthalmology Pharmaceutical / Equity Capital Markets

<p>Zhaoke Ophthalmology is a pre-revenue pharmaceutical company specializing in ophthalmic drugs for the China market. The company has filed an Application Proof to list on the HKEX, and is a carve-out of <a href="https://www.smartkarma.com/entities/lee-s-pharmaceutical-hldgs" target="_blank" data-smartkarma-citation="entities:14616:1" rel="noopener">Lee'S Pharmaceutical Hldgs (950 HK)</a> , which owns 34% of the shares. This Insight discusses the product pipelines (both innovative and generic), funding, and valuation (particularly in the context of the parent company).  We tag this Insight as Bullish for now.</p>

Zhaoke Ophthalmology is a pre-revenue pharmaceutical company specializing in ophthalmic drugs for the China market. The company has filed an Application Proof to list on the HKEX, and is a carve-out of Lee'S Pharmaceutical Hldgs (950 HK) , which owns 34% of the shares. This Insight discusses the product pipelines (both innovative and generic), funding, and valuation (particularly in the context of the parent company).  We tag this Insight as Bullish for now.

Zhaoke Ophthalmology: Bringing Focus to China

Telefonaktiebolaget Lm Ericsso / Event-Driven

<div>
<div>
<h3>Trends</h3>
</div>
</div>
<div>
<p>Mixed: discounts have generally widened across the European space.</p>
</div>
<div>
<div>
<h3>Recommended trades</h3>
</div>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/entities/carlsberg-a-s" target="_blank" data-smartkarma-citation="entities:22320:1" rel="noopener">Carlsberg A/S (CARLB DC)</a> B shares are trading at a 16.6% discount (7.5% by mid-January and 4.3% by mid-December) vs. the A shares. This is an interesting level to set up a mean reversion trade LONG B shares/short A shares, in my view.</li>
<li>
<a href="https://www.smartkarma.com/entities/bayerische-motoren-werke-ag" target="_blank" rel="noopener"></a>
<p><a href="https://www.smartkarma.com/entities/bayerische-motoren-werke-ag" target="_blank" data-smartkarma-citation="entities:21591:1" rel="noopener">Bayerische Motoren Werke AG (BMW GR)</a> exhibited a trend towards a reduction of the discount of preferred shares, until March 2020. The discount is tightening and is now 20.5% (vs. 25.2% by mid-December). I would keep the trade long BMW prefs, short common shares on, with a target of a 15% discount.</p>
</li>
<li>
<p><a href="https://www.smartkarma.com/entities/fuchs-petrolub-se" target="_blank" data-smartkarma-citation="entities:21624:1" rel="noopener">Fuchs Petrolub SE (FPE GR)</a> 's premium seems to vary within a range, which is probably liquidity related. It is 29.4% (vs. 29.9% by mid-December and 34.4% in my October report). With over 50% of the ordinary shares, the Fuchs family maintains the majority vote. They have never stated they would consolidate and pride to be the number 1 among the independent suppliers of lubricants.</p>
<p>Although there is no reason why the voting rights should be specially dear in Fuchs's case, voting rights are still valuable and neither the dividend advantage of the preferred shares nor their being members of several midcap indexes (Prime Standard/MDAX; STOXX Europe 600; DAXplus Familiy 30) justify the large premium, in my view. Maintain the trade long ords/short prefs, with a 10% target.</p>
</li>
<li>
<p><a href="https://www.smartkarma.com/entities/henkel-ag-co-kgaa" target="_blank" data-smartkarma-citation="entities:21646:1" rel="noopener">Henkel AG &amp; Co KGaA (HEN3 GR)</a> shows a long-term trend towards a reduction of the premium of the preferred shares. The premium has recently tightened and is now 11.8%. Maintain the trade short prefs/long common shares with a 10% premium target.</p>
</li>
<li>
<p>Voting rights are valuable in a company like <a href="https://www.smartkarma.com/entities/volkswagen-ag" target="_blank" data-smartkarma-citation="entities:21738:1" rel="noopener">Volkswagen (VOW GR)</a>. Prefs discount is 10.7% (vs. 8% by mid-December and 4.9% discount in November). It has moved sideways since mid-September. Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. That said, the ordinary shares are also liquid. The shareholder structure of Volkswagen is stable, and there seems to be no reason why the discount of the prefs should widen. Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. Recommendation is long prefs/short ords. Plus it can be executed in size. The discount tightened since the March 2020 selloff and has widened again over the last months, for no obvious reason.</p>
</li>
<li>
<p><a href="https://www.smartkarma.com/entities/buzzi-unicem-spa" target="_blank" data-smartkarma-citation="entities:21146:1" rel="noopener">Buzzi Unicem (BZU IM)</a>: from 18 January 2021 the mandatory conversion of the savings shares into ordinary shares will be effective and therefore, from that date only ordinary shares are traded;</p>
</li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/entities/danieli-c-officine-meccaniche" target="_blank" data-smartkarma-citation="entities:21177:1" rel="noopener">Danieli &amp; C. Officine Meccaniche (DAN IM)</a>:  the mandatory conversion and extraordinary dividend were approved on the shareholders meetings on 28 October. The conversion date is yet to be announced but expected soon. Since announcement, the adjusted spread has ranged between -5.48% and 5.9%. It is currently 0.64%.</li>
<li>
<a href="https://www.smartkarma.com/entities/telecom-italia-sp-a" target="_blank" data-smartkarma-citation="entities:21075:1" rel="noopener">Telecom Italia Sp A (TIT IM)</a> savings shares are trading at a 10.7% premium to ordinary shares (vs. a 9.5% premium by mid-January). Challenging macro means that the financial privileges of the savings shares count. More importantly, the market may think of a conversion of savings into ords à la Buzzi Unicem or Danieli. Short savings/long ords.</li>
</ul>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<p><a href="https://www.smartkarma.com/entities/grifols-sa" target="_blank" data-smartkarma-citation="entities:21274:1" rel="noopener">Grifols SA (GRF SM)</a> B shares are trading at a 39.7% discount (vs. 34.1% by mid-January, 35.2% by mid-December, 38.5% in November and 41.9% by mid-September), there is a trend towards the tightening of this discount since mid-March. The Covid-related antitakeover provisions issued by the Spanish Government mean that the voting rights are less valuable now. Moreover, the by-laws contain a poison pill that should significantly reduce the discount in case of a takeover attempt. Last but no least, “the markets can remain irrational longer than you can remain solvent.” The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade long B shares traded on Nasdaq, short A shares traded in Madrid. The target is a 27% discount. Please note there is FX risk, which can be hedged.</p>
</li>
<li>
<p>The current discount in <a href="https://www.smartkarma.com/entities/atlas-copco-ab" target="_blank" data-smartkarma-citation="entities:22282:1" rel="noopener">Atlas Copco AB (ATCOA SS)</a> B shares vs. A shares is 14.1% (vs. 12.9% by mid-January, 13.1% by mid-December and 12.7% by mid-November). Although there is no catalyst in sight, I recommend setting up Long B shares/short A shares, with a target of &gt;10% discount.</p>
</li>
<li>The discount in the <a href="https://www.smartkarma.com/entities/telefonaktiebolaget-lm-ericsso" target="_blank" data-smartkarma-citation="entities:22354:1" rel="noopener">Telefonaktiebolaget Lm Ericsso (ERICB SS)</a> (Ericsson) B shares has widened to 11%. I would set up the trade Long B shares/short A shares with a 3% discount target.</li>
<li>
<p>Other than Industrivärden, the other major shareholder of <a href="https://www.smartkarma.com/entities/ssab-ab" target="_blank" data-smartkarma-citation="entities:22492:1" rel="noopener">SSAB AB (SSABA SS)</a> is Solidium Oy (State of Finland). The reversal on the discount over the last 15 months has no obvious explanation. The discount has tightened to 9.1% (vs. 13% by mid-January, 12.2% by mid-December and 8% by mid-November). I would short B shares and go long A shares.</p>
</li>
<li>
<p>The discount of non-voting <a href="https://www.smartkarma.com/entities/roche-holding-ag-77bd09c9-b0c2-45ea-98f1-6a7ca01dc9c5" target="_blank" data-smartkarma-citation="entities:27906:1" rel="noopener">Roche Holding AG (ROG SW)</a> shares has widened to 2.7%. Considering past-performance, it seems an interesting level to set up long non-voting/short bearer shares. The Hoffman family and related holds 45% of the voting rights (shareholder pooling agreement) whilst Novartis holds 33.3% of the voting rights.</p>
</li>
<li>
<p>The discount in <a href="https://www.smartkarma.com/entities/schroders-plc" target="_blank" data-smartkarma-citation="entities:22134:1" rel="noopener">Schroders PLC (SDR LN)</a> reflects Schroders' way of corporate governance and the influence of family control (45.4% voting rights with a 36% economic interest). The discount is now 34.1% (vs 34.9% by mid-December and 33.4% by mid-November), but it reached 42% on 19 May. I would set up long non-voting/short voting shares.</p>
<p>Over 2020, Schroders cancelled 9 mn voting shares, but only 100k non-voting. Considering the discount, it would create value cancelling non-voting stock, but the company did the opposite.</p>
</li>
</ul>
</div>
<div>
<p><em>Please read on for table and charts</em>.</p>
</div>



Trends



Mixed: discounts have generally widened across the European space.



Recommended trades





Carlsberg A/S (CARLB DC) B shares are trading at a 16.6% discount (7.5% by mid-January and 4.3% by mid-December) vs. the A shares. This is an interesting level to set up a mean reversion trade LONG B shares/short A shares, in my view.


Bayerische Motoren Werke AG (BMW GR) exhibited a trend towards a reduction of the discount of preferred shares, until March 2020. The discount is tightening and is now 20.5% (vs. 25.2% by mid-December). I would keep the trade long BMW prefs, short common shares on, with a target of a 15% discount.


Fuchs Petrolub SE (FPE GR) 's premium seems to vary within a range, which is probably liquidity related. It is 29.4% (vs. 29.9% by mid-December and 34.4% in my October report). With over 50% of the ordinary shares, the Fuchs family maintains the majority vote. They have never stated they would consolidate and pride to be the number 1 among the independent suppliers of lubricants.
Although there is no reason why the voting rights should be specially dear in Fuchs's case, voting rights are still valuable and neither the dividend advantage of the preferred shares nor their being members of several midcap indexes (Prime Standard/MDAX; STOXX Europe 600; DAXplus Familiy 30) justify the large premium, in my view. Maintain the trade long ords/short prefs, with a 10% target.


Henkel AG &amp; Co KGaA (HEN3 GR) shows a long-term trend towards a reduction of the premium of the preferred shares. The premium has recently tightened and is now 11.8%. Maintain the trade short prefs/long common shares with a 10% premium target.


Voting rights are valuable in a company like Volkswagen (VOW GR). Prefs discount is 10.7% (vs. 8% by mid-December and 4.9% discount in November). It has moved sideways since mid-September. Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. That said, the ordinary shares are also liquid. The shareholder structure of Volkswagen is stable, and there seems to be no reason why the discount of the prefs should widen. Preference shares have in the past traded at a premium due to its higher liquidity and inclusion in stock indexes. Recommendation is long prefs/short ords. Plus it can be executed in size. The discount tightened since the March 2020 selloff and has widened again over the last months, for no obvious reason.


Buzzi Unicem (BZU IM): from 18 January 2021 the mandatory conversion of the savings shares into ordinary shares will be effective and therefore, from that date only ordinary shares are traded;






Danieli &amp; C. Officine Meccaniche (DAN IM):  the mandatory conversion and extraordinary dividend were approved on the shareholders meetings on 28 October. The conversion date is yet to be announced but expected soon. Since announcement, the adjusted spread has ranged between -5.48% and 5.9%. It is currently 0.64%.

Telecom Italia Sp A (TIT IM) savings shares are trading at a 10.7% premium to ordinary shares (vs. a 9.5% premium by mid-January). Challenging macro means that the financial privileges of the savings shares count. More importantly, the market may think of a conversion of savings into ords à la Buzzi Unicem or Danieli. Short savings/long ords.





Grifols SA (GRF SM) B shares are trading at a 39.7% discount (vs. 34.1% by mid-January, 35.2% by mid-December, 38.5% in November and 41.9% by mid-September), there is a trend towards the tightening of this discount since mid-March. The Covid-related antitakeover provisions issued by the Spanish Government mean that the voting rights are less valuable now. Moreover, the by-laws contain a poison pill that should significantly reduce the discount in case of a takeover attempt. Last but no least, “the markets can remain irrational longer than you can remain solvent.” The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade long B shares traded on Nasdaq, short A shares traded in Madrid. The target is a 27% discount. Please note there is FX risk, which can be hedged.


The current discount in Atlas Copco AB (ATCOA SS) B shares vs. A shares is 14.1% (vs. 12.9% by mid-January, 13.1% by mid-December and 12.7% by mid-November). Although there is no catalyst in sight, I recommend setting up Long B shares/short A shares, with a target of &gt;10% discount.

The discount in the Telefonaktiebolaget Lm Ericsso (ERICB SS) (Ericsson) B shares has widened to 11%. I would set up the trade Long B shares/short A shares with a 3% discount target.

Other than Industrivärden, the other major shareholder of SSAB AB (SSABA SS) is Solidium Oy (State of Finland). The reversal on the discount over the last 15 months has no obvious explanation. The discount has tightened to 9.1% (vs. 13% by mid-January, 12.2% by mid-December and 8% by mid-November). I would short B shares and go long A shares.


The discount of non-voting Roche Holding AG (ROG SW) shares has widened to 2.7%. Considering past-performance, it seems an interesting level to set up long non-voting/short bearer shares. The Hoffman family and related holds 45% of the voting rights (shareholder pooling agreement) whilst Novartis holds 33.3% of the voting rights.


The discount in Schroders PLC (SDR LN) reflects Schroders' way of corporate governance and the influence of family control (45.4% voting rights with a 36% economic interest). The discount is now 34.1% (vs 34.9% by mid-December and 33.4% by mid-November), but it reached 42% on 19 May. I would set up long non-voting/short voting shares.
Over 2020, Schroders cancelled 9 mn voting shares, but only 100k non-voting. Considering the discount, it would create value cancelling non-voting stock, but the company did the opposite.




Please read on for table and charts.


Liquid Universe of European Ordinary and Preferred Shares: February Report

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<p>First of all, Merry Christmas and Happy New Year!</p>
<p><strong>1. Industry viewpoints:</strong></p>
<ul>
<li>While we are still waiting for the official results of the volume-based purchase (VBP) negotiations in 2020, let’s take a further look at the competitive landscape of PD-1/L1 in China.</li>
<li>The regenerative medical implant devices would be a development trend of medical implant devices in the future.</li>
<li>Affected by the centralized procurement policy in China, the growth rate of high-value medical consumables market is expected to slow year by year.</li>
</ul>
<p><strong>2. Company news:</strong></p>
<p style="text-align: start;">News about the progress of new drugs from <a href="https://www.smartkarma.com/entities/alphamab-oncology" target="_blank" data-smartkarma-citation="entities:28213:1" rel="noopener">Alphamab Co Ltd (9966 HK)</a>, <a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a>, <a href="https://www.smartkarma.com/entities/ascletis-pharma-inc" target="_blank" data-smartkarma-citation="entities:27265:1" rel="noopener">Ascletis Pharma Inc (1672 HK)</a> and <a href="https://www.smartkarma.com/entities/jiangsu-hengrui-medicine-co-ltd" target="_blank" data-smartkarma-citation="entities:14128:1" rel="noopener">Jiangsu Hengrui Medicine (600276 CH)</a>.</p>
<p><strong>3. Market review:</strong></p>
<p>Last week, stock price for healthcare sector in A share increased 1.1%, while CSI 300 increased 0.84% over the same period of time.</p>
<p><strong>4. Risk Disclosure:</strong></p>
<p style="text-align: start;">Policy risk, R&amp;D risk, Company risk and COVID-19 risk.</p>

First of all, Merry Christmas and Happy New Year!
1. Industry viewpoints:

While we are still waiting for the official results of the volume-based purchase (VBP) negotiations in 2020, let’s take a further look at the competitive landscape of PD-1/L1 in China.
The regenerative medical implant devices would be a development trend of medical implant devices in the future.
Affected by the centralized procurement policy in China, the growth rate of high-value medical consumables market is expected to slow year by year.

2. Company news:
News about the progress of new drugs from Alphamab Co Ltd (9966 HK), Innovent Biologics Inc (1801 HK), Ascletis Pharma Inc (1672 HK) and Jiangsu Hengrui Medicine (600276 CH).
3. Market review:
Last week, stock price for healthcare sector in A share increased 1.1%, while CSI 300 increased 0.84% over the same period of time.
4. Risk Disclosure:
Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

Alpha-Centric ESG Research

Kyle Rudden

<p>The Biden-Harris administration recently announced four "Day One" priorities, the first of which is their COVID-19 response plan. COVID-19 response is first, because it is a prerequisite to economic recovery, which is the second of their four "Day One" priorities.</p><p>Several investment themes are inherent in Biden's COVID-19 plan, some more direct and obvious than others. This Insight overviews more significant themes and their most representative stocks, in three sections (the first two will be expanded on in separate upcoming reports):</p><ol>
<li>
<strong>COVID-19 Testing:</strong> Testing is the largest, most tangible, nearest-term investment opportunity created by Biden's plan. An estimated US$75-100 billion for testing could be windfall for certain stocks, but not all. Selectivity is key, and timing is critical (related to vaccine development).</li>
<li>
<strong>Vaccine Delivery:</strong> Biden's plan emphasises vaccine manufacturing and delivery, versus vaccine development (Trump had allocated <a href="https://www.hhs.gov/coronavirus/explaining-operation-warp-speed/index.html" target="_blank" rel="noopener">billions</a> to vaccine development companies). Some might go to big pharma companies for M&amp;D, but most should benefit other "cold chain" stocks.</li>
<li>
<strong>PPE Supply/Other:</strong> PPE manufacturing, of course, but that is largely old news. I will address it, but do so along with other more interesting collateral themes. For example, retail drugs chains, elder-care, medical technologies, and a few other related industries.</li>
</ol>

The Biden-Harris administration recently announced four "Day One" priorities, the first of which is their COVID-19 response plan. COVID-19 response is first, because it is a prerequisite to economic recovery, which is the second of their four "Day One" priorities.Several investment themes are inherent in Biden's COVID-19 plan, some more direct and obvious than others. This Insight overviews more significant themes and their most representative stocks, in three sections (the first two will be expanded on in separate upcoming reports):

COVID-19 Testing: Testing is the largest, most tangible, nearest-term investment opportunity created by Biden's plan. An estimated US$75-100 billion for testing could be windfall for certain stocks, but not all. Selectivity is key, and timing is critical (related to vaccine development).

Vaccine Delivery: Biden's plan emphasises vaccine manufacturing and delivery, versus vaccine development (Trump had allocated billions to vaccine development companies). Some might go to big pharma companies for M&amp;D, but most should benefit other "cold chain" stocks.

PPE Supply/Other: PPE manufacturing, of course, but that is largely old news. I will address it, but do so along with other more interesting collateral themes. For example, retail drugs chains, elder-care, medical technologies, and a few other related industries.


Biden COVID-19 Response Plan: Overview of Its Inherent Investment Themes

United States

Roche Holding AG develops and manufactures pharmaceutical and diagnostic products. The Company produces prescription drugs in the areas of cardiovascular, infectious, autoimmune, respiratory diseases, dermatology, metabolic disorders, oncology, transplantation, and the central nervous system. Roche Holding serves customers worldwide.

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Roche Holding (ROG SW)

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Biden COVID-19 Response Plan: Overview of Its Inherent Investment Themes

Biden's recently-announced COVID-19 response plan suggests a number of investment themes. This Insight overviews the more significant of those...

Kyle Rudden

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