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

<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

<p>The Ecopro tender spread is still compressed at the 2% level. The current arb yield stands at 2.54% at the last close. </p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap gain"}'>Swap gain</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Ecopro Co., Ltd."}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=Terms!R[-10]C[0]">Ecopro Co., Ltd.</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Ecopro HN Co Ltd"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=Terms!R[-6]C[-1]">Ecopro HN Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"086520"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-10]C[0]">086520</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"383310"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-6]C[-1]">383310</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":98400}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula='=googlefinance(Terms!R[-11]C[0], "price")'>₩98,400</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":111100}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula='=googlefinance(Terms!R[-7]C[-1], "price")'>₩111,100</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap price"}'>Swap price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":95441}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-10]C[0]">₩95,441</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":110500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-6]C[-1]">₩110,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap ratio"}'>Swap ratio</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":1.157783342588615}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-1]C[1]/R[-1]C[0]">1.1577833</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price for 100 shares of the target company"}'>Price for 100 shares of the target company</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":11110000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[1]*100">₩11,110,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Number of new shares of the acquiring company"}'>Number of new shares of the acquiring company</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":115.7783342588615}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=100*R[-2]C[0]">115.7783343</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of the new shares at the current price"}'>Value of the new shares at the current price</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":11392588.091071973}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-1]C[0]*R[-5]C[0]">₩11,392,588</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap gain"}'>Swap gain</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":0.0254354717436519}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-1]C[0]-R[-3]C[0])/R[-3]C[0]">2.54%</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>The spread has not exceeded 3% since October 8, when short-selling restrictions were lifted and arb trading became possible.</p><div class="content-highlight"><p><strong>The main reason the spread is not widening is that the share price of Ecopro HN has risen, which paradoxically shows that short-term purchases for arb trading are influencing it strongly.</strong></p></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/519/original/image_27181164221634749642433.png?1634749643" class="editor-image img-responsive" data-smartkarma-image-id="236519"></figure><hr><p><strong>This tender event is briefly summarized as follows:</strong></p><ul>
<li>Acquirer: Ecopro Co., Ltd.</li>
<li>Stocks subject to purchase: Ecopro HN registered common stock (6,121,973 shares)</li>
<li>Payment method: Grant of new common stock of Ecopro Co., Ltd. (cash payment for fraction stocks)</li>
<li>Tendering period: October 13 ~ November 1, 2021</li>
<li>Tendering price: ₩110,500 per share</li>
<li>Ecopro Co., Ltd. issuance price of new shares: ₩95,441 per share</li>
<li>Stock exchange ratio: 1.1577833 (Ecopro 1.1577833 shares exchanged per 1 Ecopro HN share)</li>
<li>Stock settlement date and cash payment date (for fractional shares): November 4, 2021</li>
<li>Listing date: November 19, 2021</li>
<li>Subscription channel: must physically visit a Daishin Securities branch (+82 1588-4488)</li>
</ul><hr><p>The most active arb-trading institutional investors in stock swap events in the Korean local market are local brokerages/investment advisories. Since October 8, they have significantly increased their stock purchases of Ecopro HN. In other words, this proves that a significant level of arb trading is taking place in this event.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/527/original/Screen+Shot+2021-10-20+at+4.30.59+PM.png?1634761895" class="editor-image img-responsive" data-smartkarma-image-id="236527"></figure><p>Short-selling on Ecopro Co., Ltd. also increased significantly from October 8. For reference, October 12 was the day when Ecopro Co was shorting-restricted. By the way, we see a significant discrepancy on October 8 between local brokerages/investment advisories' net buying of Ecopro HN and the short-selling on Ecopro Co. It seems to be because those investors had bought Ecopro HN during the short-selling ban period short-sold Ecopro Co., Ltd on this day.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/535/original/Screen+Shot+2021-10-20+at+4.31.17+PM.png?1634765907" class="editor-image img-responsive" data-smartkarma-image-id="236535"></figure></section>

The Ecopro tender spread is still compressed at the 2% level. The current arb yield stands at 2.54% at the last close. 







Swap gain
Ecopro Co., Ltd.
Ecopro HN Co Ltd


Ticker
086520
383310


Current price
₩98,400
₩111,100


Swap price
₩95,441
₩110,500


Swap ratio
1.1577833


Price for 100 shares of the target company
₩11,110,000


Number of new shares of the acquiring company
115.7783343


Value of the new shares at the current price
₩11,392,588


Swap gain
2.54%

Source: DART &amp; KRX

The spread has not exceeded 3% since October 8, when short-selling restrictions were lifted and arb trading became possible.The main reason the spread is not widening is that the share price of Ecopro HN has risen, which paradoxically shows that short-term purchases for arb trading are influencing it strongly.This tender event is briefly summarized as follows:
Acquirer: Ecopro Co., Ltd.
Stocks subject to purchase: Ecopro HN registered common stock (6,121,973 shares)
Payment method: Grant of new common stock of Ecopro Co., Ltd. (cash payment for fraction stocks)
Tendering period: October 13 ~ November 1, 2021
Tendering price: ₩110,500 per share
Ecopro Co., Ltd. issuance price of new shares: ₩95,441 per share
Stock exchange ratio: 1.1577833 (Ecopro 1.1577833 shares exchanged per 1 Ecopro HN share)
Stock settlement date and cash payment date (for fractional shares): November 4, 2021
Listing date: November 19, 2021
Subscription channel: must physically visit a Daishin Securities branch (+82 1588-4488)
The most active arb-trading institutional investors in stock swap events in the Korean local market are local brokerages/investment advisories. Since October 8, they have significantly increased their stock purchases of Ecopro HN. In other words, this proves that a significant level of arb trading is taking place in this event.Short-selling on Ecopro Co., Ltd. also increased significantly from October 8. For reference, October 12 was the day when Ecopro Co was shorting-restricted. By the way, we see a significant discrepancy on October 8 between local brokerages/investment advisories' net buying of Ecopro HN and the short-selling on Ecopro Co. It seems to be because those investors had bought Ecopro HN during the short-selling ban period short-sold Ecopro Co., Ltd on this day.

Ecopro Tender Event: Pro-Ration Risk Analysis & Arb Spread Widening Possibilities

<h2>Swap ratio finalized</h2><p>Ecopro (acquirer) finalized the swap price at ₩95,441 on October 7. It was based on the VWAP for the three trading days from October 5 to 7. The discount rate applied in this case was 0%.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/192/original/1.png?1633700911" class="editor-image img-responsive" data-smartkarma-image-id="234192"></figure><p></p></section><div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/196/original/4.png?1633703258" class="editor-image img-responsive" data-smartkarma-image-id="234196"></figure><p>FYI, Ecopro HN (the target company)'s swap price was finalized at ₩110,500 based on the formula below.</p>
</div><div><ul style="list-style-type: disc;">
<li>September 3 is the reference date.</li>
<li>It was calculated through Min [Close on September 3, Average(Close on September 3, 1W VWAP, 1M VWAP)].</li>
<li>It is in accordance with the regulations of KRX.</li>
</ul></div><section><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/234/193/original/image?1633701146" class="editor-image img-responsive" data-smartkarma-image-id="234193"></figure></section><div>
<div class="content-highlight"><p><strong>So, the swap ratio got finalized at 1.1577833, meaning that you will swap your one share of Ecopro HN with 1.1577833 shares of Ecopro. The target number of shares remains the same at 6,121,973 shares, worth ₩676.5B.</strong></p></div>
<table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Acquirer"}'>Acquirer</td>
<td data-sheets-value='{"1":2,"2":"Ecopro Co., Ltd."}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Ecopro Co., Ltd. (086520)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Qty."}'>- Qty.</td>
<td 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":" - Swap price"}'><strong>- Swap price</strong></td>
<td data-sheets-value='{"1":3,"3":95441}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>₩95,441</strong></td>
</tr>
<tr><td colspan="2"><strong> </strong></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target company"}'>Target company</td>
<td data-sheets-value='{"1":2,"2":"Ecopro HN Co Ltd"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Ecopro HN Co Ltd (383310)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Qty."}'><strong>- Qty.</strong></td>
<td data-sheets-value='{"1":3,"3":6121973}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>6,121,973</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Swap price"}'><strong>- Swap price</strong></td>
<td data-sheets-value='{"1":3,"3":110500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>₩110,500</strong></td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap ratio"}'><strong>Swap ratio</strong></td>
<td data-sheets-value='{"1":3,"3":1.1577833}'><strong>1.1577833</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target volume as % of SO"}'>Target volume as % of SO</td>
<td data-sheets-value='{"1":3,"3":0.400000013067683}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[-3]C[0]/googlefinance(R[-4]C[0], "shares")'>40.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target value"}'><strong>Target value</strong></td>
<td data-sheets-value='{"1":3,"3":676477981838}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-8]C[0]*R[-7]C[0]"><strong>₩676,477,981,838</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td data-sheets-value='{"1":2,"2":"Daishin"}'>Daishin</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>
</div>

Swap ratio finalizedEcopro (acquirer) finalized the swap price at ₩95,441 on October 7. It was based on the VWAP for the three trading days from October 5 to 7. The discount rate applied in this case was 0%.
FYI, Ecopro HN (the target company)'s swap price was finalized at ₩110,500 based on the formula below.

September 3 is the reference date.
It was calculated through Min [Close on September 3, Average(Close on September 3, 1W VWAP, 1M VWAP)].
It is in accordance with the regulations of KRX.

So, the swap ratio got finalized at 1.1577833, meaning that you will swap your one share of Ecopro HN with 1.1577833 shares of Ecopro. The target number of shares remains the same at 6,121,973 shares, worth ₩676.5B.






Overview

Acquirer
Ecopro Co., Ltd. (086520)


- Qty.
7,087,918


- Swap price
₩95,441

 

Target company
Ecopro HN Co Ltd (383310)


- Qty.
6,121,973


- Swap price
₩110,500



Swap ratio
1.1577833


Target volume as % of SO
40.00%


Target value
₩676,477,981,838


Banker
Daishin

Source: DART




Ecopro Tender: Swap Ratio Finalized, Still Juicy Spread, & We Can Buy/Tender Now

<p><strong>Ecopro's tender offer to HN shareholders is slightly different from the previous cases in terms of the undertaking.</strong></p><hr><p>First, the tender offer procedure has not changed. The target is 6,121,913 shares, equivalent to 40% of Ecopro HN's issued shares. And the swap price of Ecopro HN is ₩110,500. The important point here is that this ₩110,500 has been confirmed and therefore won't change.</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":"Overview"}'>Overview</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":"Acquirer"}'>Acquirer</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ecopro Co., Ltd."}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Ecopro Co., Ltd.</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"086520"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula='="086520"'>086520</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Qty."}'><strong>- Qty.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6371529}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>6,371,529</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Swap price"}'><strong>- Swap price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":106172}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>106,172</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target company"}'>Target company</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Ecopro HN Co Ltd"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>Ecopro HN Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Ticker"}'>- Ticker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"383310"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='="383310"'>383310</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Qty."}'><strong>- Qty.</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6121973}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>6,121,973</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Swap price"}'><strong>- Swap price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":110500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>₩110,500</strong></td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target volume as % of SO"}'><strong>Target volume as % of SO</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.400000013067683}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=R[-2]C[0]/googlefinance(R[-3]C[0], "shares")'><strong>40.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target value"}'><strong>Target value</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":676478016500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-2]C[0]*R[-3]C[0]"><strong>₩676,478,016,500</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Daishin"}'>Daishin</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>For reference, the swap price of Ecopro HN, ₩110,500, was calculated as follows.</p><ul>
<li>September 3 is the reference date.</li>
<li>It was calculated through Min [Close on September 3, Average(Close on September 3, 1W VWAP, 1M VWAP)].</li>
<li>This is in accordance with the regulations of KRX.</li>
</ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/238/original/Screen+Shot+2021-09-06+at+10.01.23+PM.png?1630980223" class="editor-image img-responsive" data-smartkarma-image-id="228238"></figure></section><p><strong>The next important thing is that Ecopro's swap price is not fixed. </strong>₩106,172 is literally a tentative price. It was calculated by the formula below.</p><ul>
<li>September 1 is the reference date.</li>
<li>It was calculated through 3D VWAP at a discount rate of 0%.</li>
<li>This also follows the rules of KRX.</li>
</ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/239/original/Screen+Shot+2021-09-06+at+10.08.38+PM.png?1630980616" class="editor-image img-responsive" data-smartkarma-image-id="228239"></figure></section><p>This ₩106,172 is not a fixed amount, so it has practically no meaning. So when will Ecopro's swap price be finalized? <strong>Ecopro's swap price is confirmed through VWAP for 3 days from October 5th to 7th. The discount rate applied in this case is 0%.</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/228/242/original/Screen+Shot+2021-09-06+at+9.35.16+PM.png?1630980823" class="editor-image img-responsive" data-smartkarma-image-id="228242"></figure></section><hr><div class="content-highlight"><p><strong>Therefore, it is meaningless to calculate the swap arb spread at this point with the tentative price.</strong></p></div>

Ecopro's tender offer to HN shareholders is slightly different from the previous cases in terms of the undertaking.First, the tender offer procedure has not changed. The target is 6,121,913 shares, equivalent to 40% of Ecopro HN's issued shares. And the swap price of Ecopro HN is ₩110,500. The important point here is that this ₩110,500 has been confirmed and therefore won't change.





Overview

Type
Exchange offer


Acquirer
Ecopro Co., Ltd.


- Ticker
086520


- Qty.
6,371,529


- Swap price
106,172


Target company
Ecopro HN Co Ltd


- Ticker
383310


- Qty.
6,121,973


- Swap price
₩110,500



Target volume as % of SO
40.00%


Target value
₩676,478,016,500


Banker
Daishin

Source: DART

For reference, the swap price of Ecopro HN, ₩110,500, was calculated as follows.
September 3 is the reference date.
It was calculated through Min [Close on September 3, Average(Close on September 3, 1W VWAP, 1M VWAP)].
This is in accordance with the regulations of KRX.
The next important thing is that Ecopro's swap price is not fixed. ₩106,172 is literally a tentative price. It was calculated by the formula below.
September 1 is the reference date.
It was calculated through 3D VWAP at a discount rate of 0%.
This also follows the rules of KRX.
This ₩106,172 is not a fixed amount, so it has practically no meaning. So when will Ecopro's swap price be finalized? Ecopro's swap price is confirmed through VWAP for 3 days from October 5th to 7th. The discount rate applied in this case is 0%.Therefore, it is meaningless to calculate the swap arb spread at this point with the tentative price.

Ecopro Tender: Undertaking Is a Bit Different but Should Offer a Fairly Juicy Arb Setup

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>Ecopro Co Ltd (086520 KS) announced after the market close on September 6th that it will conduct a rights offering worth 676 billion won, representing 37% of market cap. The company will issue 6.37 million new shares (representing 34% of its existing outstanding shares) and the rights offering price is 106,172 won per share, representing 9.1% premium to the current price.</p><p>The following are the key dates of the rights offering:</p><ul>
<li>Subscription expected dates - 13 October to 1 November</li>
<li>Rights offering subscription payments required - 4 November</li>
<li>Rights offering new shares listing - 19 November</li>
</ul><p>Ecopro Co will use the proceeds from the rights offering to purchase 6.12 million shares of Ecopro HN at 110,500 won (2% premium to current price) which total 676 billion won. Ecopro HN has 15.3 million shares outstanding so 6.12 million shares to be purchased in the tender offer would be 40% of outstanding shares. </p><div class="content-highlight"><p>Despite the opportunity to purchase an increasing stake in Ecopro HN, this will result in a significant shares dilution for the existing shareholders of Ecopro Co which is a big negative. Many investors will be concerned about Ecopro Co purchasing a large stake of Ecopro HN, especially after a steep increase in the latter company's stock price in the past three months. As a result, we have a Negative view of Ecopro Co at current levels. </p></div>

Ecopro Co Ltd (086520 KS) announced after the market close on September 6th that it will conduct a rights offering worth 676 billion won, representing 37% of market cap. The company will issue 6.37 million new shares (representing 34% of its existing outstanding shares) and the rights offering price is 106,172 won per share, representing 9.1% premium to the current price.The following are the key dates of the rights offering:
Subscription expected dates - 13 October to 1 November
Rights offering subscription payments required - 4 November
Rights offering new shares listing - 19 November
Ecopro Co will use the proceeds from the rights offering to purchase 6.12 million shares of Ecopro HN at 110,500 won (2% premium to current price) which total 676 billion won. Ecopro HN has 15.3 million shares outstanding so 6.12 million shares to be purchased in the tender offer would be 40% of outstanding shares. Despite the opportunity to purchase an increasing stake in Ecopro HN, this will result in a significant shares dilution for the existing shareholders of Ecopro Co which is a big negative. Many investors will be concerned about Ecopro Co purchasing a large stake of Ecopro HN, especially after a steep increase in the latter company's stock price in the past three months. As a result, we have a Negative view of Ecopro Co at current levels. 

Ecopro Co Announces A Rights Offering Worth 676 Billion Won (37% of Market Cap)

South Korea

Ecopro HN Co. Ltd. operates as an environmental company. The Company provides environment engineering, environment consulting, and other related services. Ecopro Insight offers services throughout South Korea.

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Ecopro HN (383310 KS)

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Ecopro Co Announces A Rights Offering Worth 676 Billion Won (37% of Market Cap)

Ecopro Co announced on September 6th that it will conduct a rights offering worth 676 billion won, representing 37% of market cap. We believe this...

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