European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<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

<p>The Spanish Government ends, de facto, the liberalizing regime that ruled over the Spanish economy since 1999, because it considers necessary to limit the possible acquisitions of strategic Spanish companies by ANY foreign investor after the COVID-19 hit.</p>
<p>The <strong>Spanish Government enhances anti-takeover rules</strong>:</p>
<ul>
<li>Temporarily <strong>until June 30, 2021</strong>, the Government has suspended the liberalization regime for foreign direct investments made by residents and other countries of the EU and the EFTA. <strong>Any attempt to acquire over 10% of a Spanish listed company by any EU or EFTA corporate or investor must be approved by the Cabinet.</strong>
</li>
<li>In the case of <strong>investments of non-EU origin, the suspension of the liberalization regime is maintained indefinitely</strong>, until a new legislative change is introduced.</li>
<li>This protects the Ibex 35 companies from takeover raids by European rivals.</li>
</ul>
<p>This rule could make it possible to avoid hypothetical bids of <a href="https://www.smartkarma.com/entities/total-sa" target="_blank" data-smartkarma-citation="entities:812:1" rel="noopener">Total Sa (FP FP)</a> or <a href="https://www.smartkarma.com/entities/eni-spa" target="_blank" data-smartkarma-citation="entities:21185:1" rel="noopener">Eni SpA (ENI IM)</a> for <a href="https://www.smartkarma.com/entities/repsol-sa" target="_blank" data-smartkarma-citation="entities:21292:1" rel="noopener">Repsol SA (REP SM)</a> or <a href="https://www.smartkarma.com/entities/deutsche-telekom-ag" target="_blank" data-smartkarma-citation="entities:21611:1" rel="noopener">Deutsche Telekom Ag (DTE GR)</a> for <a href="https://www.smartkarma.com/entities/telefonica-sa" target="_blank" data-smartkarma-citation="entities:21299:1" rel="noopener">Telefonica SA (TEF SM)</a> , which have been the subject of rumours in the market.</p>
<ul>
<li>Analysts see Repsol and Telefónica as the most vulnerable members of the IBEX 35 index, due to their current low valuation. Repsol trades at 4.9x EV/Forward EBITDA vs. the median of comparable companies, 6.3x. Telefonica is trading at 5.2x EV/Forward EBITA vs. the median of comparable companies, 6.5x.</li>
</ul>
<p>Some transactions that are underway could be affected. For example, the French group Vinci agreed to buy the industrial services division of ACS, for over €5 bn (for reference: <a href="https://www.smartkarma.com/insights/acs-unlocking-value-via-disposals" target="_blank" data-smartkarma-citation="insights:44311" rel="noopener">ACS: Unlocking Value Via Disposals</a>).</p>

The Spanish Government ends, de facto, the liberalizing regime that ruled over the Spanish economy since 1999, because it considers necessary to limit the possible acquisitions of strategic Spanish companies by ANY foreign investor after the COVID-19 hit.
The Spanish Government enhances anti-takeover rules:

Temporarily until June 30, 2021, the Government has suspended the liberalization regime for foreign direct investments made by residents and other countries of the EU and the EFTA. Any attempt to acquire over 10% of a Spanish listed company by any EU or EFTA corporate or investor must be approved by the Cabinet.

In the case of investments of non-EU origin, the suspension of the liberalization regime is maintained indefinitely, until a new legislative change is introduced.
This protects the Ibex 35 companies from takeover raids by European rivals.

This rule could make it possible to avoid hypothetical bids of Total Sa (FP FP) or Eni SpA (ENI IM) for Repsol SA (REP SM) or Deutsche Telekom Ag (DTE GR) for Telefonica SA (TEF SM) , which have been the subject of rumours in the market.

Analysts see Repsol and Telefónica as the most vulnerable members of the IBEX 35 index, due to their current low valuation. Repsol trades at 4.9x EV/Forward EBITDA vs. the median of comparable companies, 6.3x. Telefonica is trading at 5.2x EV/Forward EBITA vs. the median of comparable companies, 6.5x.

Some transactions that are underway could be affected. For example, the French group Vinci agreed to buy the industrial services division of ACS, for over €5 bn (for reference: ACS: Unlocking Value Via Disposals).

Enhanced Limits to Investments in Spanish Companies

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

<div>
<h3>Trends</h3>
</div>
<div>
<p>There has been no obvious trend over the last three months regarding the discounts, although it has widened in some names.  Trading opportunities are less obvious, but some still exist.</p>
</div>
<div>
<h3>Recommended trades</h3>
</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 23.2%. 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 of preferred shares is a whopping 34.4% currently. Remember that voting rights are valuable. Recommendation: 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> : the premium is 13.0% (down from 15.4% in my September report). I would set up a 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 5.8% discount of the prefs. seems about right. It has moved sideways since mid-September.  If you believe that the higher liquidity of the prefs will, at some point, mean that the discount will close, then a long prefs/short ords 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 35.9% 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 37.9% 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 13.2%. I recommend setting up Long B shares/short A shares, with a target of &gt;10% discount.</p>
</li>
<li>
<p>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 tightened since my July recommendation: from 8.7% to 6.8%. I would keep the trade on with a 3% discount target.</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> is now 32.7% (vs. 27% by mid-September). I would set up long non-voting/short voting shares.</p>
</div>
</li>
</ul>
<p>Please read on for table and charts.</p>
</div>


Trends


There has been no obvious trend over the last three months regarding the discounts, although it has widened in some names.  Trading opportunities are less obvious, but some still exist.


Recommended trades





Bayerische Motoren Werke AG (BMW GR) : the discount has traded sideways since mid-September, and is now 23.2%. 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 of preferred shares is a whopping 34.4% currently. Remember that voting rights are valuable. Recommendation: long ords/short prefs, with a 10% target.


Henkel AG &amp; Co KGaA (HEN3 GR) : the premium is 13.0% (down from 15.4% in my September report). I would set up a trade long prefs/short common shares with a 10% premium target.


Voting rights are valuable in a company like Volkswagen (VOW GR) , so a 5.8% discount of the prefs. seems about right. It has moved sideways since mid-September.  If you believe that the higher liquidity of the prefs will, at some point, mean that the discount will close, then a long prefs/short ords 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 35.9% 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 37.9% 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 13.2%. 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 tightened since my July recommendation: from 8.7% to 6.8%. I would keep the trade on with a 3% discount target.



The discount in Schroders PLC (SDR LN) is now 32.7% (vs. 27% by mid-September). 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: October Report

<h3><strong>Trends</strong></h3>
<p>There has been no obvious trend over the last two months regarding the discounts, although it has widened in some names. Some of the previous (May and June) recommendations have been bang on. Trading opportunities are less obvious, but some still exist.</p>
<h3><strong>Recommended trades</strong></h3>
<ul class="">
<li>
<a href="https://www.smartkarma.com/entities/carlsberg-a-s" target="_blank" rel="noopener">Carlsberg A/S (CARLB DC)</a>: close trade long B/short A shares (B are trading at 4.4% discount from 12% in June).</li>
<li>
<a href="https://www.smartkarma.com/entities/bayerische-motoren-werke-ag" target="_blank" rel="noopener">Bayerische Motoren Werke AG (BMW GR)</a> : the discount has widened to 23% from 18% by mid-August, as a result of recent volatility. I would recommend setting up a trade <strong>long BMW prefs, short ords</strong> with a target of a 15% discount.</li>
<li>
<a href="https://www.smartkarma.com/entities/fuchs-petrolub-se" target="_blank" rel="noopener">Fuchs Petrolub Se (FPE GR)</a> 's premium of preferred shares is a whopping 33.6% currently. Remember that <em>voting rights are valuable</em>. Recommendation: <strong>long ords/short prefs</strong>, with a 10% target.</li>
<li>
<a href="https://www.smartkarma.com/entities/henkel-ag-co-kgaa" target="_blank" rel="noopener">Henkel AG &amp; Co Kgaa (HEN3 GR)</a> The premium of the preferred shares is 15.4%. I would set up a trade <strong>long prefs/short common shares</strong> with a 10% discount target.</li>
<li>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 <strong>5.8% discount of the prefs</strong>. seems about right. If you believe that the higher liquidity of the prefs will, at some point, mean that the discount will close, then a long prefs/short ords 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. </li>
<li>
<a href="https://www.smartkarma.com/entities/grifols-sa" target="_blank" rel="noopener">Grifols SA (GRF SM)</a> B shares are trading at a 41.9% discount (vs. 38% in June). The discount in Grifols B shares has averaged 28% since listing of the B shares in February 2016. I recommend setting up the trade <strong>long B shares traded on Nasdaq, short A shares traded in Madrid</strong>. The target is a 27% discount. Please note there is FX risk, which can be hedged.</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 tightened since my July recommendation: from 8.7% to 7.7%. I would keep the trade on with a 3% discount target.</li>
</ul>
<p>Please read on for table and charts.</p>

Trends
There has been no obvious trend over the last two months regarding the discounts, although it has widened in some names. Some of the previous (May and June) recommendations have been bang on. Trading opportunities are less obvious, but some still exist.
Recommended trades


Carlsberg A/S (CARLB DC): close trade long B/short A shares (B are trading at 4.4% discount from 12% in June).

Bayerische Motoren Werke AG (BMW GR) : the discount has widened to 23% from 18% by mid-August, as a result of recent volatility. I would recommend setting up a trade long BMW prefs, short ords with a target of a 15% discount.

Fuchs Petrolub Se (FPE GR) 's premium of preferred shares is a whopping 33.6% currently. Remember that voting rights are valuable. Recommendation: long ords/short prefs, with a 10% target.

Henkel AG &amp; Co Kgaa (HEN3 GR) The premium of the preferred shares is 15.4%. I would set up a trade long prefs/short common shares with a 10% discount target.
Voting rights are valuable in a company like Volkswagen (VOW GR) , so a 5.8% discount of the prefs. seems about right. If you believe that the higher liquidity of the prefs will, at some point, mean that the discount will close, then a long prefs/short ords 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. 

Grifols SA (GRF SM) B shares are trading at a 41.9% discount (vs. 38% in June). 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 discount in the Telefonaktiebolaget Lm Ericsso (ERICB SS) (Ericsson) B shares has tightened since my July recommendation: from 8.7% to 7.7%. I would keep the trade on with a 3% discount target.

Please read on for table and charts.

Liquid Universe of European Ordinary and Preferred Shares: September Report

Spain

Grifols S.A. develops, manufactures, and markets plasma derivatives, IV Therapy, enteral nutrition, diagnostic systems, and medical materials.

Laboratorios Farmaceuticos Rovi SA is a specialty pharmaceutical company. The Company researches, develops, manufactures, and markets small molecule and specialty biologic drugs. Rovi's services include contract manufacturing of aseptic filling and packaging of small-volume parenterals in prefilled syringes and vials and provides temperature-controlled storage facilities.

Laboratorios Farmaceuticos ROVI (ROVI SM)

Oryzon Genomics, SA is a clinical stage biopharmaceutical company that develops epigenetics-based therapeutics.

Almirall SA is an international pharmaceutical company. The Company produces allergy and respiratory, cardiovascular, central nervous system, digestive, infectious disease, oncology, osteomuscular, pediatric, and urology  drugs.

Faes Farma, S.A. develops, manufactures and markets pharmaceutical products throughout Spain and, through its subsidiary, Laboratorios Vitoria S.A., in Portugal. The Company's principal prescription products combat cardiovascular, respiratory, central nervous system, musculoskeletal and osteoporosis related ailments.

Biocon Ltd., is an integrated biotechnology enterprise with a presence in biopharmaceuticals, enzymes, custom research and clinical research. The Company's pharmaceutical products include statins, immunosuppressants and anti-diabetic drugs. Biocon also manufactures specialty enzymes and new enzyme applications besides providing clinical and custom research services.

Blueprint Medicines Corporation develops and distributes biomedical treatments. The Company researches and produces medicines and treatments for cancer targeting the molecular differences. Blueprint Medicines focuses selective drugs for genomically defined cancer patients.

Beijing Tiantan Biological Products Corporation Limited researches, develops, and commercializes biological products.  The Company provides treatment for hepatitis and offers a line of vaccine products including hepatitis vaccines and rubella vaccines.

Beijing Tiantan Biological Products (600161 CH)

Exact Sciences Corp., is focused on developing and commercializing a non-invasive molecular screening test for the early detection and prevention of colorectal cancer. The Company's test is a stool-based DNA test that identifies both pre-cancer and cancer by detecting genetic mutations in colorectal cancer cells.

Ionis Pharmaceuticals, Inc. operates as a biotechnology company. The Company researches in RNA-targeted drug discovery and development that focuses on drugs for patients who have unmet medical needs. Ionis Pharmaceuticals serves customers in the United States.

ImmunoGen, Inc. develops targeted anticancer therapeutics using its Targeted Antibody Payload (TAP) technology together with its expertise in monoclonal antibodies and tumor biology. A TAP compound uses a tumor-targeting monoclonal antibody to deliver one of  ImmunoGen's purpose-developed cancer-killing agents specifically to tumor cells.

Repligen Corporation is a bioprocessing company focused on the development, production, and commercialization of innovative products used in the process of manufacturing biologic drugs. The Company's customers include life sciences companies, global biopharmaceutical companies, and contract manufacturers worldwide.

Cytokinetics, Incorporated is a clinical-stage biopharmaceutical company.  The Company is focused on the discovery and development of novel small molecule therapeutics that modulate muscle function for the potential treatment of serious diseases and medical conditions.

IVERIC bio, Inc. operates as a biopharmaceutical company. The Company develops treatments for patients with orphan inherited retinal diseases with significant unmet medical needs. IVERIC bio serves customers in the United States.

PharmaEssentia Corporation develops and distributes therapeutic products for treatment in human disease. The Company develops drugs to treat hepatitis, chronic myeloid leukemia (CML), essential thrombocythemia (ET), myeloid fibrosis (MF), polycythemia vera (PV), hepatitis and cancer.

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

Grifols SA (GRF SM)

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

Enhanced Limits to Investments in Spanish Companies

Any attempt to acquire over 10% of a Spanish listed company by any foreign investor must be approved by the Cabinet. This could prevent bids of...

Jesus Rodriguez Aguilar

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

Liquid Universe of European Ordinary and Preferred Shares: October Report

No clear trend over the last three months regarding discounts. Some ords/prefs trades/situations to watch: BMW, Fuchs Petrolub, Henkel, Volkswagen,...

Jesus Rodriguez Aguilar

Liquid Universe of European Ordinary and Preferred Shares: September Report

XXXXXXX XXXXXXX

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)