European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

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

<div>
<div>
<h3>Trends</h3>
</div>
</div>
<div>
<p>Mixed: discounts have generally tightened across the European space.</p>
</div>
<div>
<div>
<h3>Recommended trades</h3>
</div>
</div>
<div>
<ul>
<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 7.5% discount (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. The discount is tightening, and is now 23.6%. I would recommend setting up a trade long BMW prefs, short common shares 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 28.3% (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 widened since the beginning of November and is now 15% (vs. 13.6% by mid-December). Maintain the trade long prefs/short 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 9.5% (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 <strong>long prefs/short ords</strong>. Plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range.</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>: since announcement of the conversion ratio, the spread has moved between 2.5% and -0.51%. The current spread is 0.36%. The conversion should take place before the end of February.</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 4.6%. It is currently -0.86%.</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 9.5% premium to ordinary shares. 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 <em>à la</em> 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 34.1% discount (vs. 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. 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 12.9% vs. 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>
<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 widened recently to 13% (vs. 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 2.1%. 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>
<div>
<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 33% (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>
</div>
<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>
<p><em>Please read on for table and charts</em>.</p>



Trends



Mixed: discounts have generally tightened across the European space.



Recommended trades





Carlsberg A/S (CARLB DC) B shares are trading at a 7.5% discount (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. The discount is tightening, and is now 23.6%. I would recommend setting up a trade long BMW prefs, short common shares 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 28.3% (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 widened since the beginning of November and is now 15% (vs. 13.6% by mid-December). Maintain the trade long prefs/short common shares with a 10% premium target.


Voting rights are valuable in a company like Volkswagen (VOW GR). Prefs discount is 9.5% (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 selloff and has been moving within a tight range.


Buzzi Unicem (BZU IM): since announcement of the conversion ratio, the spread has moved between 2.5% and -0.51%. The current spread is 0.36%. The conversion should take place before the end of February.






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 4.6%. It is currently -0.86%.

Telecom Italia Sp A (TIT IM) savings shares are trading at a 9.5% premium to ordinary shares. 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 34.1% discount (vs. 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. 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 12.9% vs. 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.


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 widened recently to 13% (vs. 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 2.1%. 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 33% (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: January Report

<div>
<div>
<h3>Trends</h3>
</div>
</div>
<div>
<p>Discounts have generally tightened 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/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. The <strong>discount is widening, and is now 25.2%</strong>. I would recommend setting up a trade long BMW prefs, short common shares 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 <strong>premium</strong> seems to vary within a range, which is probably liquidity related. It is <strong>29.9%</strong> (vs. 34.4% in my October report). Remember that voting rights are valuable. 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 widened since the beginning of November and is 13.6%. Maintain the trade long prefs/short 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><strong>Prefs discount is 8%</strong> (vs. 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. Recommendation is long  prefs/short ords. Plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range.</p>
</li>
<li>
<div>
<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>: since announcement of the conversion ratio, the spread has moved between 2.5% and -0.37%. The current spread is 0.27%. There is not definitive date for the conversion, but the market believes it will happen very soon.</p>
</div>
</li>
</ul>
<div>
<ul>
<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 <strong>adjusted spread</strong> has ranged between -2.1% and 4.6%. It is currently <strong>-3.27%</strong>. I recommend <strong>long Danieli ords/short Danieli savings shares</strong>.</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 9.3% premium to ordinary shares. 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 like Buzzi Unicem or Danieli.</li>
</ul>
</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><strong>B shares are trading at a 35.2% discount</strong> (vs. 41.9 by mid-September, and 38.5% in November), 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. 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 <strong>13.1%</strong> (vs. 12.7% by mid-November). I recommend setting up Long B shares/short A shares, with a target of &gt;10% discount.</p>
</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 widened recently to 12.2% (vs. 8% by mid-November). I would <strong>short B shares and go long A shares</strong>.</p>
</li>
<li>
<div>
<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. The discount is now 34.9% (vs. 33.4% by mid-November and 27% by mid-September), but it reached 42% on 19 May. I would set up <strong>long non-voting/short voting</strong> shares.</p>
</div>
</li>
</ul>
<div id="annotable-executive_summary-4"></div>
</div>
<div>
<p><em>Please read on for table and charts</em>.</p>
</div>



Trends



Discounts have generally tightened across the European space.



Recommended trades






Bayerische Motoren Werke AG (BMW GR) exhibited a trend towards a reduction of the discount of preferred shares, until March. The discount is widening, and is now 25.2%. I would recommend setting up a trade long BMW prefs, short common shares 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 29.9% (vs. 34.4% in my October report). Remember that voting rights are valuable. 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 widened since the beginning of November and is 13.6%. Maintain the trade long prefs/short common shares with a 10% premium target.


Voting rights are valuable in a company like Volkswagen (VOW GR).Prefs discount is 8% (vs. 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. Recommendation is long  prefs/short ords. Plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range.



Buzzi Unicem (BZU IM): since announcement of the conversion ratio, the spread has moved between 2.5% and -0.37%. The current spread is 0.27%. There is not definitive date for the conversion, but the market believes it will happen very soon.






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 -2.1% and 4.6%. It is currently -3.27%. I recommend long Danieli ords/short Danieli savings shares.

Telecom Italia Sp A (TIT IM) savings shares are trading at a 9.3% premium to ordinary shares. 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 like Buzzi Unicem or Danieli.




Grifols SA (GRF SM)B shares are trading at a 35.2% discount (vs. 41.9 by mid-September, and 38.5% in November), 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. 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 13.1% (vs. 12.7% by mid-November). I recommend setting up Long B shares/short A shares, with a target of &gt;10% discount.


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 widened recently to 12.2% (vs. 8% by mid-November). I would short B shares and go long A shares.



The discount in Schroders PLC (SDR LN) reflects Schroders' way of corporate governance and the influence of family control. The discount is now 34.9% (vs. 33.4% by mid-November and 27% by mid-September), but it reached 42% on 19 May. I would set up long non-voting/short voting shares.






Please read on for table and charts.


Liquid Universe of European Ordinary and Preferred Shares: December Report

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<p>The S&amp;P DJI Global Indices team <a href="https://www.spglobal.com/spdji/en/documents/indexnews/announcements/20201211-1277389/1277389_tes15aircaivspindnkn4.pdf?force_download=true" target="_blank" rel="noopener">confirmed</a> Friday night that <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with <a href="https://www.smartkarma.com/entities/apartment-invt-mgmt-co-a" target="_blank" data-smartkarma-citation="entities:2193:1" rel="noopener">Apartment Invt &amp; Mgmt Co A (AIV US)</a> coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing <a href="https://www.smartkarma.com/entities/dunkin-brands-group-inc" target="_blank" data-smartkarma-citation="entities:15866:1" rel="noopener">Dunkin' Brands Group (DNKN US)</a> in the S&amp;P Midcap 400, and <a href="https://www.smartkarma.com/entities/occidental-petroleum-corp" target="_blank" data-smartkarma-citation="entities:17075:1" rel="noopener">Occidental Petroleum (OXY US)</a> coming out of the S&amp;P100 but staying in the S&amp;P500. </p><p>When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. </p><p>My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.</p><p>Which is a lot.</p><p>The arithmetic, and an explanation of why it matters, follow.</p>

The S&amp;P DJI Global Indices team confirmed Friday night that Tesla Motors (TSLA US) would join the S&amp;P500 and the S&amp;P100 at the close of trading on 18 December, with Apartment Invt &amp; Mgmt Co A (AIV US) coming out of S&amp;P500 and its 14 December spin-out Apartment Income REIT replacing Dunkin' Brands Group (DNKN US) in the S&amp;P Midcap 400, and Occidental Petroleum (OXY US) coming out of the S&amp;P100 but staying in the S&amp;P500. When the S&amp;P announced on the 16th of November that Tesla would be joining the S&amp;P500 in December, it said the pro-forma inclusion weight would be ~1.01% (without measuring what would come out). S&amp;P also said that it would update the pro-forma inclusion weight and trading value impact when the Deletion was announced, but they did not. My calc suggests it is 1.47% as of Friday's close. And the two-way trading value based on the S&amp;P's original US$51bn number is, as of today, ~US$152bn.Which is a lot.The arithmetic, and an explanation of why it matters, follow.

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

Bayerische Motoren Werke (BMW) / Event-Driven

<div>
<div>
<h3>Trends</h3>
</div>
</div>
<div>
<p>Discounts have generally tightened across the European space, in line with stock markets recovering.</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/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> : the discount has traded sideways since mid-September, and is now 23.7%. I would recommend setting up a trade long BMW prefs, short common shares 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 27% (vs. 34.4% in my October report). Remember that voting rights are valuable. 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 is 12.3% (down from 15.4% in my September report, and 13% in October). Maintain the trade long prefs/short 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> , so a 4.9% discount of the prefs. seems about right (5.8% by mid-October).  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. If you believe that this higher liquidity will mean that the discount will close, then a long prefs/ short common shares may be an option; plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range.</p>
</li>
<li>
<p>A 36% discount of <a href="https://www.smartkarma.com/entities/danieli-c-officine-meccanich" target="_blank" data-smartkarma-citation="entities:21177:1" rel="noopener">Danieli &amp; C Officine Meccanich (DAN IM)</a> savers (vs. 37.5% in September and 39% in June) seems still too wide, and low liquidity does not help. I keep on recommending long savers/short ordinaries. A 30% discount is not a demanding target.</p>
</li>
<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 38.5% discount (vs. 41.9 by mid-September), there is a trend towards the tightening of this discount since mid-March. 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 12.7% (vs. 13.2% by mid-October). I recommend setting up Long B shares/short A shares, with a target of &gt;10% discount.</p>
</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 widened recently to 8%. If anything, I would short B shares and go long A shares.</p>
</li>
<li>
<p>The discount is now 33.4% (vs. 32.7% by mid-October and 27% by mid-September), but it reached 42% on 19 May. I would set up long non-voting/short voting shares.</p>
</li>
</ul>
</div>
<div>
<p><em>Please read on for table and charts</em>.</p>
</div>



Trends



Discounts have generally tightened across the European space, in line with stock markets recovering.



Recommended trades






Bayerische Motoren Werke AG (BMW GR) : the discount has traded sideways since mid-September, and is now 23.7%. I would recommend setting up a trade long BMW prefs, short common shares 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 27% (vs. 34.4% in my October report). Remember that voting rights are valuable. 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 is 12.3% (down from 15.4% in my September report, and 13% in October). Maintain the trade long prefs/short common shares with a 10% premium target.


Voting rights are valuable in a company like Volkswagen (VOW GR) , so a 4.9% discount of the prefs. seems about right (5.8% by mid-October).  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. If you believe that this higher liquidity will mean that the discount will close, then a long prefs/ short common shares may be an option; plus it can be executed in size. The discount tightened since the March selloff and has been moving within a tight range.


A 36% discount of Danieli &amp; C Officine Meccanich (DAN IM) savers (vs. 37.5% in September and 39% in June) seems still too wide, and low liquidity does not help. I keep on recommending long savers/short ordinaries. A 30% discount is not a demanding target.


Grifols SA (GRF SM) B shares are trading at a 38.5% discount (vs. 41.9 by mid-September), there is a trend towards the tightening of this discount since mid-March. 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 12.7% (vs. 13.2% by mid-October). I recommend setting up Long B shares/short A shares, with a target of &gt;10% discount.


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 widened recently to 8%. If anything, I would short B shares and go long A shares.


The discount is now 33.4% (vs. 32.7% by mid-October and 27% by mid-September), but it reached 42% on 19 May. I would set up long non-voting/short voting shares.




Please read on for table and charts.


Liquid Universe of European Ordinary and Preferred Shares: November Report

Germany

Bayerische Motoren Werke Aktiengesellschaft (BMW) manufactures and sells cars and motorcycles. The Company offers convertible sports cars, sedans, and touring motorcycles with large displacement engines. BMW serves customers worldwide.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Bayerische Motoren Werke (BMW) (BMW GR)

Liquid Universe of European Ordinary and Preferred Shares: February Report

Spreads have generally widened across the European liquid universe. Interesting long/short situations are: Carlsberg, BMW, Fuchs Petrolub, Henkel,...

Jesus Rodriguez Aguilar

Liquid Universe of European Ordinary and Preferred Shares: January Report

Mixed trends regarding premiums and discounts of non-voting vs. voting stock. Interesting long/short situations are: Carlsberg, BMW, Fuchs...

Jesus Rodriguez Aguilar

Liquid Universe of European Ordinary and Preferred Shares: December Report

Discounts and Premiums have generally tightened across the European Space. Compelling situations are: VOW, Danieli, Telecom Italia, Grifols and SSAB.

Jesus Rodriguez Aguilar

Tesla Into S&P - Rebal Details, and Implications for Vol and Active Portfolio Reconstruction

The TSLA S&P500 inclusion involves $150bn of direct flows and perhaps another $200-300bn indirect flows. It really is a MAMMOTH trade. And index...

Travis Lundy

Liquid Universe of European Ordinary and Preferred Shares: November Report

Discounts have generally tightened across the European space, in line with stock markets recovering. There are some trading opportunities flagged...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)