Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.</li>
<li>These 58 stocks on average could be subject to further selling pressures in December and could underperform relative to the market. </li>
<li>Among these 58 stocks, the top 5 market cap stocks include HYBE, Kakao Games, WCP, Sillajen, and Duksan Neolux. </li>
</ul>


We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.
These 58 stocks on average could be subject to further selling pressures in December and could underperform relative to the market. 
Among these 58 stocks, the top 5 market cap stocks include HYBE, Kakao Games, WCP, Sillajen, and Duksan Neolux. 


End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022

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.

<ul>
<li>Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX's liquidity crisis, Upbit's liquidity management risk will inevitably rise to the surface.</li>
<li>Doubts about whether the size of Upbit's assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.</li>
<li>These concerns are likely to affect HYBE's share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.</li>
</ul>


Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX's liquidity crisis, Upbit's liquidity management risk will inevitably rise to the surface.
Doubts about whether the size of Upbit's assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.
These concerns are likely to affect HYBE's share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.


HYBE Shorting Opportunity with a Lockup Release from Dunamu

<ul>
<li>Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.</li>
<li>The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft's stake further declined, and the LTV ratio was subsequently lowered.</li>
<li>Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.</li>
</ul>


Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.
The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft's stake further declined, and the LTV ratio was subsequently lowered.
Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.


Netmarble Debt Risk Victim: HYBE or NCsoft or Both?

Equity Bottom-Up

<ul>
<li>On 17 October, the Korean government made a final official decision to have the BTS members serve in the mandatory military service.</li>
<li>We believe this will have a major negative impact on the sales and profits of HYBE in the next several years.</li>
<li>As a result of the Korean government formalizing the BTS members to enlist in the military, we believe that HYBE's share price could fall more than 50% from current levels.</li>
</ul>


On 17 October, the Korean government made a final official decision to have the BTS members serve in the mandatory military service.
We believe this will have a major negative impact on the sales and profits of HYBE in the next several years.
As a result of the Korean government formalizing the BTS members to enlist in the military, we believe that HYBE's share price could fall more than 50% from current levels.


HYBE: Korean Govt Mandates BTS Members to Enlist in Military - 50% Further Downside Risk Ahead

<ul>
<li>In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. </li>
<li>CJ ENM's valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023. </li>
<li>The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.</li>
</ul>


In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. 
CJ ENM's valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023. 
The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.


Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)

South Korea

HYBE Co., Ltd. operates as an entertainment company. The Company provides music production, album distribution, entertainers management, publicity, planning, training, and other services. HYBE also makes television shows.

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HYBE (352820 KS)

End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022

We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.

Douglas Kim

HYBE Shorting Opportunity with a Lockup Release from Dunamu

This post details a significant lockup release of HYBE shares on December 9 and assesses the possibility of these released shares owed by Dunamu...

Sanghyun Park

Netmarble Debt Risk Victim: HYBE or NCsoft or Both?

This post details Netmarble's stock loan rollover for the SpinX acquisition and how this poses a margin call risk for HYBE and NCsoft.

Sanghyun Park

HYBE: Korean Govt Mandates BTS Members to Enlist in Military - 50% Further Downside Risk Ahead

As a result of the Korean government formalizing the BTS members to enlist in the military, we believe that HYBE's share price could fall more than...

Douglas Kim

Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)

In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE. CJ ENM's valuations are much more attractive and offer...

Douglas Kim

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