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

<ul>
<li>The FnGuide Secondary Battery Index currently holds an AUM of ₩1.35T, and the next rebalancing implementation period is from June 13th to 15th.</li>
<li>Since these are same-sector stocks with a high cointegration level, they are suitable for narrow-window basket trading based on passive flow differences.</li>
<li>So, I would consider basket trading by targeting the large-cap constituents with a relatively significant passive flow: <strong><a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770)</a></strong>, <strong><a href="https://www.smartkarma.com/entities/sk-ie-technology" target="_blank" data-smartkarma-citation="entities:29207:1" rel="noopener">SK IE Technology (361610)</a></strong>, <strong><a href="https://www.smartkarma.com/entities/ecopro-bm-co-ltd" target="_blank" data-smartkarma-citation="entities:27873:1" rel="noopener">Ecopro BM (247540)</a></strong>, &amp; <strong><a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro (086520)</a></strong> </li>
</ul>


The FnGuide Secondary Battery Index currently holds an AUM of ₩1.35T, and the next rebalancing implementation period is from June 13th to 15th.
Since these are same-sector stocks with a high cointegration level, they are suitable for narrow-window basket trading based on passive flow differences.
So, I would consider basket trading by targeting the large-cap constituents with a relatively significant passive flow: SK Innovation (096770), SK IE Technology (361610), Ecopro BM (247540), &amp; Ecopro (086520) 


FnGuide Secondary Battery Index (KODEX ETF) Rebalancing Preview

<ul>
<li>Ecopro BM announced a <strong>₩0.5T rights offer</strong>: 1.6M new ordinary shares at a preliminary offering price of ₩310,300. In addition, there will also be a<strong> 1-to-3 bonus share issuance</strong>.</li>
<li>In outright Long trading aiming for a 20% discount, <strong>one thing to keep in mind is bonus issues</strong>. Post-bonus issue price correction will likely be more substantial this time.</li>
<li>
<strong> We should aim at outright shorting as moving into the bonus issue ex-rights date</strong> while watching Ecopro's share price upward trend and volatility during this event.</li>
</ul>


Ecopro BM announced a ₩0.5T rights offer: 1.6M new ordinary shares at a preliminary offering price of ₩310,300. In addition, there will also be a 1-to-3 bonus share issuance.
In outright Long trading aiming for a 20% discount, one thing to keep in mind is bonus issues. Post-bonus issue price correction will likely be more substantial this time.

 We should aim at outright shorting as moving into the bonus issue ex-rights date while watching Ecopro's share price upward trend and volatility during this event.


Ecopro BM Offering: Deal Summary & Trading Dynamics

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>After the market close today, Ecopro BM announced a rights offering worth 500 billion won as well as a bonus issue of three new shares for one existing share.</li>
<li>The tentative rights offering price is 310,300 won, which is 27% lower than current price of 423,800 won.</li>
<li>Ecopro BM's valuations remain stretched with its shares trading at high multiples and we believe there could be some further weakness in its share price in the coming weeks. </li>
</ul>


After the market close today, Ecopro BM announced a rights offering worth 500 billion won as well as a bonus issue of three new shares for one existing share.
The tentative rights offering price is 310,300 won, which is 27% lower than current price of 423,800 won.
Ecopro BM's valuations remain stretched with its shares trading at high multiples and we believe there could be some further weakness in its share price in the coming weeks. 


Ecopro BM Rights Offering Worth 500 Billion Won

<ul>
<li>
<strong>The rebalancing cycle of the KODEX Secondary Battery ETF was changed from semi-annual to quarterly.</strong> Also, the rebalancing trading takes place for three trading days instead of one trading day.</li>
<li>
<strong>This passive impact will be different from the previous rebalancing.</strong> LG Energy and SK Innovation will likely experience a significant passive outflow. Then, most small-cap constituents will receive an inflow. </li>
<li>
<strong>Among the top weighting stocks, Samsung SDI and SKIET deserve attention</strong>. Sangsin Energy, E&amp;D, and TSI will face exclusion, while C&amp;I, Sang-A Frontec, and Enchem will likely join the ETF.</li>
</ul>



The rebalancing cycle of the KODEX Secondary Battery ETF was changed from semi-annual to quarterly. Also, the rebalancing trading takes place for three trading days instead of one trading day.

This passive impact will be different from the previous rebalancing. LG Energy and SK Innovation will likely experience a significant passive outflow. Then, most small-cap constituents will receive an inflow. 

Among the top weighting stocks, Samsung SDI and SKIET deserve attention. Sangsin Energy, E&amp;D, and TSI will face exclusion, while C&amp;I, Sang-A Frontec, and Enchem will likely join the ETF.


KODEX Battery ETF Rebalancing Cycle Changed to Quarterly: Preview for March Rebalancing

<h2>Pro-ration results</h2>
<p>As suggested in the previous insight <a href="https://www.smartkarma.com/insights/ecopro-tender-event-pro-ration-risk-analysis-arb-spread-widening-possibilities" target="_blank" data-smartkarma-citation="insights:59265" rel="noopener">Ecopro Tender Event: Pro-Ration Risk Analysis &amp; Arb Spread Widening Possibilities</a>, Ecopro's final subscription rate fell short of hitting the target. The final rate was 74.41%, issuing only 5.27M new Ecopro shares. The forfeited shares are 1.81M, and these will not be issued.</p>
<section class="figure">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/790/original/Screen+Shot+2021-11-02+at+10.31.05+PM.png?1636073811" class="editor-image img-responsive" data-smartkarma-image-id="239790"></figure>
</section>
<div class="content-caption">(<a href="https://engkind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptNo=20211102000129&amp;docno=&amp;formProcsCd=070&amp;language=english" target="_blank" rel="noopener">Source: KRX KIND</a>)</div>
<p>As a result, Ecopro's number of issued shares will increase by 5.27M from <span data-sheets-value='{"1":3,"3":18701387}' data-sheets-userformat='{"2":15041,"3":{"1":2,"2":"#,##0","3":1},"9":2,"10":1,"12":0,"14":{"1":2,"2":0},"15":"Courier New","16":9}' data-sheets-formula='=googlefinance(R[-1]C[0], "shares")'>18.7M to 24.0M, representing a capital increase rate of 28.2% at a shareholding dilution of 22.0% </span></p>
<table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr>
<td colspan="2" data-sheets-value='{"1":2,"2":"Swap results"}'>Swap results</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Type"}'>Type</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Exchange offer"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>Exchange offer</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target"}'>Target</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7087918}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>7,087,918</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":": Capital increase rate"}'>: Capital increase rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.37900493690655135}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[-1]C[0]/googlefinance(R[-2]C[1], "shares")'>37.90%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":": Dilution"}'>: Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.27483943440895364}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-2]C[0]/(R[-2]C[0]+R[-2]C[1])">27.48%</td>
</tr>
<tr>
<td colspan="2"></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Actual tendered"}'><strong>Actual tendered</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5274285}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>5,274,285</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":": Capital increase rate"}'><strong>: Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.282026407987814}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-4]C[1]"><strong>28.20%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":": Dilution"}'><strong>: Dilution</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.21998486632616596}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-2]C[0]/(R[-2]C[0]+R[-5]C[1])"><strong>22.00%</strong></td>
</tr>
<tr>
<td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td>
</tr>
</tbody>
</table>
<p>Since October 8, when the swap price ratio was finally confirmed, the swap arb spread has risen to a little above 3%. During the 20-day arb trading period, the spread had fluctuated pretty much at a 2-3% range. During this period, the relatively tight arb spread appears to be due to active arb trading, believing that pro-ration risk shouldn't be high.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/791/original/image_84768239521636074386606.png?1636074388" class="editor-image img-responsive" data-smartkarma-image-id="239791"></figure>

Pro-ration results
As suggested in the previous insight Ecopro Tender Event: Pro-Ration Risk Analysis &amp; Arb Spread Widening Possibilities, Ecopro's final subscription rate fell short of hitting the target. The final rate was 74.41%, issuing only 5.27M new Ecopro shares. The forfeited shares are 1.81M, and these will not be issued.



(Source: KRX KIND)
As a result, Ecopro's number of issued shares will increase by 5.27M from 18.7M to 24.0M, representing a capital increase rate of 28.2% at a shareholding dilution of 22.0% 







Swap results


Type
Exchange offer


Target
7,087,918


: Capital increase rate
37.90%


: Dilution
27.48%





Actual tendered
5,274,285


: Capital increase rate
28.20%


: Dilution
22.00%


Source: DART



Since October 8, when the swap price ratio was finally confirmed, the swap arb spread has risen to a little above 3%. During the 20-day arb trading period, the spread had fluctuated pretty much at a 2-3% range. During this period, the relatively tight arb spread appears to be due to active arb trading, believing that pro-ration risk shouldn't be high.


Ecopro Tender: Pro-Ration Results, KOSDAQ 150 Corporate Action & Est. Passive Impact

South Korea

Ecopro Co., Ltd. specializes in developing chemical absorbent and NDC (Nano Carbon Ball) in the field of environmental materials for the prevention of air pollution.  The Company's products include environment-related chemical filters, second battery materials, and CO catalyst.

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Ecopro Co Ltd (086520 KS)

FnGuide Secondary Battery Index (KODEX ETF) Rebalancing Preview

This post previews the FnGuide Secondary Battery Index rebalancing in June. The tradable names at this point are SK Innovation, SKIET, Ecopro BM,...

Sanghyun Park

Ecopro BM Offering: Deal Summary & Trading Dynamics

This post details Ecopro BM's ₩0.5T rights offering with a 1-to-3 bonus share issuance, announced late yesterday. It then discusses trading...

Sanghyun Park

Ecopro BM Rights Offering Worth 500 Billion Won

After the market close today, Ecopro BM announced a rights offering worth 500 billion won as well as a bonus issue of three new shares for one...

Douglas Kim

KODEX Battery ETF Rebalancing Cycle Changed to Quarterly: Preview for March Rebalancing

The rebalancing cycle of the KODEX Secondary Battery ETF was changed from semi-annual to quarterly. This post previews the upcoming rebalancing...

Sanghyun Park

Ecopro Tender: Pro-Ration Results, KOSDAQ 150 Corporate Action & Est. Passive Impact

This post details the pro-ration results of the Ecopro tender event. In addition, it explains the corporate actions of KOSDAQ 150 and estimates the...

Sanghyun Park

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