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

<p>HYBE subscription rights trading is in full action starting today. The price opened at ₩31,050. It fell to ₩ 30,000 and then soared to ₩34,450.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Subscription rights price movement"}'>Subscription rights price movement</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Opening"}'><strong>Opening</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":31050}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'><strong>₩31,050</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"High"}'>High</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":34450}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>₩34,450</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Low"}'>Low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":30000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>₩30,000</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>The current arb yield is 2.79% at a spot price of ₩239,500 and the ceiling offering price of ₩200,000, the 1st round price.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Arb trade yield"}'>Arb trade yield</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights"}'><strong>Subscription rights</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'><strong>₩33,000</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Spot price"}'><strong>Spot price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":239500}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula='=googlefinance(Terms!R[0]C[0], "price")'><strong>₩239,500</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offering price at the ceiling"}'>Offering price at the ceiling</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":200000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula="=Pricing!R[20]C[0]">₩200,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Arb trade yield"}'><strong>Arb trade yield</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.027896995708154508}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[0]-(R[-1]C[0]+R[-3]C[0]))/(R[-3]C[0]+R[-1]C[0])"><strong>2.79%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>However, if you can manage to get a full 20% oversubscription, your arb trade yield will rise to 5.27%, again at the ceiling offering price of ₩200,000.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" style="width: 724.167px;" data-sheets-value='{"1":2,"2":"Arb trade yield"}'>Arb trade yield at a full 20% oversubscription</td></tr>
<tr>
<td style="width: 369.167px;" data-sheets-value='{"1":2,"2":"Subscription rights at a full 120% oversubscription"}'><strong>Subscription rights at a full 20% oversubscription</strong></td>
<td style="text-align: right; width: 334.167px;" data-sheets-value='{"1":3,"3":27500}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula="=33000/1.2"><strong>₩27,500</strong></td>
</tr>
<tr>
<td style="width: 369.167px;" data-sheets-value='{"1":2,"2":"Spot price"}'><strong>Spot price</strong></td>
<td style="text-align: right; width: 334.167px;" data-sheets-value='{"1":3,"3":239500}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula="=R[0]C[-3]"><strong>₩239,500</strong></td>
</tr>
<tr>
<td style="width: 369.167px;" data-sheets-value='{"1":2,"2":"Offering price at the ceiling"}'>Offering price at the ceiling</td>
<td style="text-align: right; width: 334.167px;" data-sheets-value='{"1":3,"3":200000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}' data-sheets-formula="=R[0]C[-3]">₩200,000</td>
</tr>
<tr>
<td style="width: 369.167px;" data-sheets-value='{"1":2,"2":"Arb trade yield"}'><strong>Arb trade yield</strong></td>
<td style="text-align: right; width: 334.167px;" data-sheets-value='{"1":3,"3":0.05274725274725275}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-2]C[0]-(R[-1]C[0]+R[-3]C[0]))/(R[-3]C[0]+R[-1]C[0])"><strong>5.27%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" style="width: 724.167px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

HYBE subscription rights trading is in full action starting today. The price opened at ₩31,050. It fell to ₩ 30,000 and then soared to ₩34,450.





Subscription rights price movement

Opening
₩31,050


High
₩34,450


Low
₩30,000

Source: KRX

The current arb yield is 2.79% at a spot price of ₩239,500 and the ceiling offering price of ₩200,000, the 1st round price.





Arb trade yield

Subscription rights
₩33,000


Spot price
₩239,500


Offering price at the ceiling
₩200,000


Arb trade yield
2.79%

Source: KRX

However, if you can manage to get a full 20% oversubscription, your arb trade yield will rise to 5.27%, again at the ceiling offering price of ₩200,000.





Arb trade yield at a full 20% oversubscription

Subscription rights at a full 20% oversubscription
₩27,500


Spot price
₩239,500


Offering price at the ceiling
₩200,000


Arb trade yield
5.27%

Source: KRX



HYBE Subscription Rights at a Decent Arb Yield: Why Not Trading It

<p>Korea had been one of the few countries that allowed short sellers to participate in a rights offering.</p><p>Even if you shorted the shares of a company after it had announced a rights offer, you could still <span>subscribe to new rights and repay the shorted shares with new rights.</span></p><p><span>Now, starting April 6, this practice is no longer allowed.</span></p><p><span>There had been several attempts to close this loophole in the past. But none of these attempts </span><span>hadn't even passed the parliament's preliminary session.</span></p><p><span>Finally, this time, obviously to sweeten the public-angering short-selling resumption on May 3, the latest attempt by the Korea FSC got the lawmakers' approval.</span></p><div class="content-highlight">
<p><em><a href="https://www.korea.kr/news/pressReleaseView.do?newsId=156443917" target="_blank" rel="noopener">Here is the link to the Capital Market and Financial Investment Business Act Enforcement Decree, containing the closing of this practice.</a></em></p>
<p><em>(Source: www.Korea.kr)</em></p>
</div>

Korea had been one of the few countries that allowed short sellers to participate in a rights offering.Even if you shorted the shares of a company after it had announced a rights offer, you could still subscribe to new rights and repay the shorted shares with new rights.Now, starting April 6, this practice is no longer allowed.There had been several attempts to close this loophole in the past. But none of these attempts hadn't even passed the parliament's preliminary session.Finally, this time, obviously to sweeten the public-angering short-selling resumption on May 3, the latest attempt by the Korea FSC got the lawmakers' approval.
Here is the link to the Capital Market and Financial Investment Business Act Enforcement Decree, containing the closing of this practice.
(Source: www.Korea.kr)


Korea's New Short Selling Restriction to Close the Loophole for Arb Trading on a Rights Offer

<p>As a part of the mega acquisition deal, HYBE proceeds with an offering of its own.</p><p>The company will offer 2.2 M shares for ₩440B at a capital increase of 6.25% and a shareholding dilution of 5.89%.</p><p>It is a 100% stockholder allocation at a per-share allocation of 0.0625383.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Issuer"}'>Issuer</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Big Hit Entertainment Co Ltd"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>HYBE (Big Hit Entertainment 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":"352820"}' data-sheets-formula='="352820"'>352820</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target"}'>Target</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A public offering of forfeited shares after offering to stockholders"}'>A public offering of forfeited shares after offering to stockholders</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transferability"}'>Transferability</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Renounceable"}'>Renounceable</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Volume"}'>Volume</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2227848}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>2,227,848</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Bonus issue volume"}'>Bonus issue volume</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary price"}'>Preliminary price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":197500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'>₩197,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary value"}'>Preliminary value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":439999980000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]*R[-1]C[0]">₩439,999,980,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Oversubscription privilege"}'>Oversubscription privilege</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"NH"}'>NH</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Underwriting type"}'>- Underwriting type</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Standby"}'>Standby</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Allocation"}'>Allocation</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Common"}'>Common</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35623760}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula='=googlefinance(R[-13]C[0], "shares")'>35,623,760</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Pref (incl. RCPS &amp; CPS)"}'>Pref (incl. RCPS &amp; CPS)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares"}'>Total shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35623760}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-2]C[0]+R[-1]C[0]">35,623,760</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Treasury shares"}'>Treasury shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares ex treasury shares"}'>Total shares ex treasury shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":35623760}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-2]C[0]-R[-1]C[0]">35,623,760</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offer volume"}'>Offer volume</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2227848}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">2,227,848</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Common"}'>- Common</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2227848}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-16]C[0]">2,227,848</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Pref"}'>- Pref</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Per-share allocation"}'><strong>Per-share allocation</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.06253826098087344}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[15]C[0]/R[-4]C[0]"><strong>0.0625383</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase"}'>Capital increase</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.06253826098087344}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-4]C[0]/R[-7]C[0]">6.25%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.05885742027128676}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-5]C[0]/(R[-8]C[0]+R[-5]C[0])">5.89%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares after rights offer"}'>Total shares after rights offer</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":37851608}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">37,851,608</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Common"}'>- Common</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":37851608}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]+R[-7]C[0]">37,851,608</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Pref"}'>- Pref</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-12]C[0]">0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP allocation"}'>ESOP allocation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-16]C[0]*R[1]C[0]">0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>0.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder allocation"}'>Stockholder allocation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2227848}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-18]C[0]-R[-2]C[0]">2,227,848</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-19]C[0]">100.00%</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The discount rate is set at 15%, more aggressive than the usual 20%.</p><table class="table table-striped">
<colgroup>
<col width="250">
<col width="250">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1st round"}'>1st round</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RP × (1 - 15%) / [1 + (6.25% × 15%)]"}' data-sheets-formula='="RP × (1 - "&amp;(R[11]C[0]*100&amp;"%")&amp;") / [1 + ("&amp;(R[12]C[0]*100&amp;"%"&amp;" × "&amp;(R[11]C[0]*100&amp;"%"&amp;")]"))'>RP × (1 - 15%) / [1 + (6.25% × 15%)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Min [1D VWAP, Avg (1D VWAP, 1W VWAP, 1M VWAP)]"}'>Min [1D VWAP, Avg (1D VWAP, 1W VWAP, 1M VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44300}' data-sheets-numberformat='[null,5,"yyyy. m. d",1]' data-sheets-formula="=Terms!R[41]C[0]">2021. 4. 14</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights base price"}'>Ex-rights base price</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"[RP + (1st × 6.25%)] / (1 + 6.25%)"}' data-sheets-formula='="[RP + (1st × "&amp;R[9]C[0]*100&amp;"%"&amp;")] / (1 + "&amp;R[9]C[0]*100&amp;"%"&amp;")"'>[RP + (1st × 6.25%)] / (1 + 6.25%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Previous close"}'>Previous close</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44302}' data-sheets-numberformat='[null,5,"yyyy. m. d",1]' data-sheets-formula="=Terms!R[39]C[0]">2021. 4. 16</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2nd round"}'>2nd round</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RP × (1 - 15%)"}' data-sheets-formula='="RP × (1 - "&amp;(R[5]C[0]*100&amp;"%")&amp;")"'>RP × (1 - 15%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Min [1D VWAP, Avg (1D VWAP, 1W VWAP)]"}'>Min [1D VWAP, Avg (1D VWAP, 1W VWAP)]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44343}' data-sheets-numberformat='[null,5,"yyyy. m. d",1]' data-sheets-formula="=Terms!R[40]C[0]">2021. 5. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final"}'>Final</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Max [Min (1st, 2nd), 3D VWAP × 60%]"}'>Max [Min (1st, 2nd), 3D VWAP × 60%]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44343}' data-sheets-numberformat='[null,5,"yyyy. m. d",1]' data-sheets-formula="=Terms!R[38]C[0]">2021. 5. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount rate"}'>Discount rate</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.15}' data-sheets-numberformat='[null,3,"0.00%",1]'>15.00%</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":0.0625}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=LEFT(Terms!R[11]C[0],6)*100/100">6.25%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>April 14 is the first-round pricing, followed by the ex-rights on April 16. Subscription rights trading is May 6~12. Then we have the final pricing on June 1.</p><p>The subscription is June 1, and the payment will be June 9. The new shares will get listed on June 22.  </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":"Timetable"}'>Timetable</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44288}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 4. 2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary pricing"}'>Preliminary pricing</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44300}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 4. 14</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'>Ex-rights date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44302}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 4. 16</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date"}'>Record date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44305}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 4. 19</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'>Subscription rights trade beginning</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44322}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 6</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade ending"}'>Subscription rights trade ending</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44328}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 12</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final pricing"}'>Final pricing</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44343}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 5. 27</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder subscription"}'>Stockholder subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44348}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 1</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Public subscription"}'>Public subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44351}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 4</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44356}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 9</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44369}' data-sheets-numberformat='{"1":5,"2":"yyyy. m. d","3":1}'>2021. 6. 22</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

As a part of the mega acquisition deal, HYBE proceeds with an offering of its own.The company will offer 2.2 M shares for ₩440B at a capital increase of 6.25% and a shareholding dilution of 5.89%.It is a 100% stockholder allocation at a per-share allocation of 0.0625383.





Overview

Issuer
HYBE (Big Hit Entertainment Co Ltd)


Ticker
352820


Target
A public offering of forfeited shares after offering to stockholders


Transferability
Renounceable


Volume
2,227,848


Bonus issue volume
0


Preliminary price
₩197,500


Preliminary value
₩439,999,980,000


Oversubscription privilege
20.00%


Banker
NH


- Underwriting type
Standby

Source: DART







Allocation

Common
35,623,760


Pref (incl. RCPS &amp; CPS)
0


Total shares
35,623,760


Treasury shares
0


Total shares ex treasury shares
35,623,760


Offer volume
2,227,848


- Common
2,227,848


- Pref
0


Per-share allocation
0.0625383


Capital increase
6.25%


Dilution
5.89%


Total shares after rights offer
37,851,608


- Common
37,851,608


- Pref
0


ESOP allocation
0


- %
0.00%


Stockholder allocation
2,227,848


- %
100.00%

Source: DART

The discount rate is set at 15%, more aggressive than the usual 20%.





Pricing

1st round
RP × (1 - 15%) / [1 + (6.25% × 15%)]


- Reference price (RP)
Min [1D VWAP, Avg (1D VWAP, 1W VWAP, 1M VWAP)]


- Reference date
2021. 4. 14


Ex-rights base price
[RP + (1st × 6.25%)] / (1 + 6.25%)


- Reference price (RP)
Previous close


- Reference date
2021. 4. 16


2nd round
RP × (1 - 15%)


- Reference price (RP)
Min [1D VWAP, Avg (1D VWAP, 1W VWAP)]


- Reference date
2021. 5. 27


Final
Max [Min (1st, 2nd), 3D VWAP × 60%]


- Reference date
2021. 5. 27


Discount rate
15.00%


Capital increase rate
6.25%

Source: DART

April 14 is the first-round pricing, followed by the ex-rights on April 16. Subscription rights trading is May 6~12. Then we have the final pricing on June 1.The subscription is June 1, and the payment will be June 9. The new shares will get listed on June 22.  





Timetable

BOD meeting
2021. 4. 2


Preliminary pricing
2021. 4. 14


Ex-rights date
2021. 4. 16


Record date
2021. 4. 19


Subscription rights trade beginning
2021. 5. 6


Subscription rights trade ending
2021. 5. 12


Final pricing
2021. 5. 27


Stockholder subscription
2021. 6. 1


Public subscription
2021. 6. 4


Payment
2021. 6. 9


Listing
2021. 6. 22

Source: DART



HYBE (Big Hit Ent) Rights Offer Presents a Nice Setup for a Classic Arb Trade

Below is the list of the lock-up expirations on KOSPI from April to September.











Name
Ticker
Type
Expiry date
Qty.
% of SO
MC (₩B)


Ottogi Corp
007310
Ord
2021-09-25
66,744
1.82%
2,096.7


Yuyang D&amp;U Co Ltd
011690
Ord
2021-09-19
59,000,000
40.07%
359.3


Orient Bio Inc
002630
Ord
2021-09-04
16,770,970
14.14%
182.6


CItech Co Ltd
004920
Ord
2021-08-14
1,000,000
3.99%
25.4


Hanil Cement Co Ltd
300720
Ord
2021-08-14
2,781,184
40.15%
1,104.7


Industrial Bank of Korea
024110
Ord
2021-08-13
62,192,786
8.42%
6,677.5


CJ CGV Co Ltd
079160
Ord
2021-08-08
2,054,510
5.85%
956.5


Prestige Biopharma Ltd
950210
Ord
2021-08-05
13,446,250
22.37%
1,697.7


SoluM Co Ltd
248070
Ord
2021-08-02
3,037,304
6.19%
1,244.5


Thelma Therapeutics Co Ltd
015540
Ord
2021-07-30
1,100,528
8.18%
86.2


Kiwi Media Group Co Ltd
012170
Ord
2021-07-15
378,036
0.61%
#N/A


Industrial Bank of Korea
024110
Ord
2021-07-10
12,412,204
1.68%
6,677.5


Kyobo Securities Co., Ltd.
030610
Ord
2021-07-09
28,653,296
44.32%
508.8


Kukbo Co Ltd
001140
Ord
2021-07-09
7,299,270
14.36%
112.3


Metalabs Co Ltd
090370
Ord
2021-06-18
286,902
0.45%
75.5


MERITZ SECURITIES CO LTD
008560
Ord
2021-06-17
58,651,026
8.68%
3,048.6


JR Global REIT
348950
Ord
2021-06-16
68,600,000
41.43%
862.8


Metalabs Co Ltd
090370
Ord
2021-06-11
234,208
0.37%
75.5


Myoung Shin Industrial Co Ltd
009900
Ord
2021-06-08
23,844,210
58.47%
1,068.4


IGIS Residence REIT Co Ltd
350520
Ord
2021-06-03
2,640,000
12.82%
101.1


Boryung Pharmaceutical Co., Ltd
003850
Ord
2021-06-01
3,420,000
6.56%
1,099.7


Koramco Energy Plus REIT Co Ltd
357120
Ord
2021-05-30
42,300,000
60.76%
364.1


Jooyon Tech Co Ltd
044380
Ord
2021-05-21
865,565
1.58%
60.6


Feelux Co Ltd
033180
Ord
2021-05-21
3,383,459
2.61%
438.5


A Plus Asset Advisor Co Ltd
244920
Ord
2021-05-20
6,170,440
27.29%
188.3


Industrial Bank of Korea
024110
Ord
2021-05-18
57,523,357
7.79%
6,677.5


BK Tops Co Ltd
030790
Ord
2021-05-15
4,671,077
35.58%
161.5


Kyochon F&amp;B Co Ltd
339770
Ord
2021-05-12
18,519,961
74.13%
448.4


Daiyang Metal Co Ltd
009190
Ord
2021-05-12
7,326,007
24.78%
117.4


Industrial Bank of Korea
024110
Ord
2021-05-11
29,379,034
3.98%
6,677.5


Metalabs Co Ltd
090370
Ord
2021-05-10
112,655
0.18%
75.5


CItech Co Ltd
004920
Ord
2021-04-23
6,000,000
23.93%
25.4


Big Hit Entertainment Co Ltd
352820
Ord
2021-04-15
13,744,816
38.58%
8,656.6


Samyang Corp
145990
Ord
2021-04-14
23,646
0.23%
610.6

Source: KRX KIND

Following are MC&gt;₩1T with a +20% of SO lock-up expiry. The earliest one is Big Hit Ent. (now HYBE) as 38.58% of the SO will newly hit the market on April 15. That is ₩3.34T worth of shares.











Name
Ticker
Type
Expiry date
Qty.
% of SO
MC (₩B)


Hanil Cement Co Ltd
300720
Ord
2021-08-14
2,781,184
40.15%
1,104.7


Prestige Biopharma Ltd
950210
Ord
2021-08-05
13,446,250
22.37%
1,697.7


Myoung Shin Industrial Co Ltd
009900
Ord
2021-06-08
23,844,210
58.47%
1,068.4


Big Hit Entertainment Co Ltd
352820
Ord
2021-04-15
13,744,816
38.58%
8,656.6

Source: KRX KIND

The founder Bang Si-hyuk's 34.74% will end the lock-up, as well as the Well Blink (one of the early investors)'s 2.49%, converted from the RCPS.









Big Hit Ent.
Start
End
Qty.
% of SO


Bang Si-hyuk
2020-10-15
2021-04-14
12,377,337
34.74%


WELL BLINK LIMITED
2020-10-15
2021-04-14
888,784
2.49%


Kim Nam-joon
2020-10-15
2021-04-14
68,385
0.19%


Kim Seok-jin
2020-10-15
2021-04-14
68,385
0.19%


Kim Tae-hyeong
2020-10-15
2021-04-14
68,385
0.19%


Min Yun-ki
2020-10-15
2021-04-14
68,385
0.19%


Park Ji-min
2020-10-15
2021-04-14
68,385
0.19%


Jeon Jeong-kook
2020-10-15
2021-04-14
68,385
0.19%


Jeong Ho-seok
2020-10-15
2021-04-14
68,385
0.19%

Source: KRX KIND



KOSPI Lock-Up Expirations for Apr-Sep, Feat. Big Hit Ent, Now HYBE

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>On 2 April, <strong>HYBE (formerly called Big Hit Entertainment)</strong> announced that it will merge with<strong> Ithaca Holdings, </strong>which is a leading US based media company that provides music-related management, record label, publishing, film, and TV shows. Major artists of Ithaca Holdings include Justin Bieber and Ariana Grande. In this deal, HYBE (through its subsidiary Big Hit America) will acquire a 100% stake of Ithaca Holdings for 1.186 trillion won ($1.05 billion).</p><p>With the merger between HYBE and Ithaca Holdings, the former has tried to catch two birds with one stone in terms of revenue and geographical diversification. It will also try to improve the company's know-how of distribution capabilities in the US music and media markets. In terms of valuation for Ithaca Holdings, although the M&amp;A valuation multiples (in terms of P/S and P/B) are lower than HYBE's current valuations, we do not have enough information about Ithaca's historical financials so we do not know exactly what their growth rates are so there remains some concerns of over payment. Ithaca Holdings had about 20% of HYBE's revenue in 2020. </p><p>As part of this deal, there will be two rights offering. The first rights offering is worth 440 billion won to the existing shareholders. The second rights offering is worth 182 billion won to the third parties (including Scooter Braun and major artists at Ithaca Holdings). Total share dilution from these two rights offering is 8.7% of total shares outstanding. </p><p data-widget_id="xXAvadoG"><strong>End of lock-up period for 36% of HYBE's shares in April - </strong>In the midst of all this deal making for HYBE and Ithaca Holdings, there is a crucial factor to consider which is that the <a href="https://m.stock.naver.com/index.html#/news/flashnews/view/015/0004522608" target="_blank" rel="noopener">lock-up periods</a> for nearly 36% of HYBE's shares end in 15 April 2021 (6 months after IPO), including 34.7% owned by the largest shareholder Bang Si-Hyuk.</p><div class="content-highlight"><p data-widget_id="xXAvadoG">Overall, we have some mixed views about this big deal between HYBE and Ithaca Holdings. While there are some positives about revenues and geographical diversification, there are some concerns about over payment plus there are continued concerns about whether Ithaca Holdings will be able to produce some top music talents as it has been able to do so in the past decade. In addition, the big shares that could be sold starting this month (end of lock-up period) also raises concerns about more shares being potentially sold by HYBE's insiders. Overall, we remain Negative on HYBE (Big Hit Entertainment). </p></div>

On 2 April, HYBE (formerly called Big Hit Entertainment) announced that it will merge with Ithaca Holdings, which is a leading US based media company that provides music-related management, record label, publishing, film, and TV shows. Major artists of Ithaca Holdings include Justin Bieber and Ariana Grande. In this deal, HYBE (through its subsidiary Big Hit America) will acquire a 100% stake of Ithaca Holdings for 1.186 trillion won ($1.05 billion).With the merger between HYBE and Ithaca Holdings, the former has tried to catch two birds with one stone in terms of revenue and geographical diversification. It will also try to improve the company's know-how of distribution capabilities in the US music and media markets. In terms of valuation for Ithaca Holdings, although the M&amp;A valuation multiples (in terms of P/S and P/B) are lower than HYBE's current valuations, we do not have enough information about Ithaca's historical financials so we do not know exactly what their growth rates are so there remains some concerns of over payment. Ithaca Holdings had about 20% of HYBE's revenue in 2020. As part of this deal, there will be two rights offering. The first rights offering is worth 440 billion won to the existing shareholders. The second rights offering is worth 182 billion won to the third parties (including Scooter Braun and major artists at Ithaca Holdings). Total share dilution from these two rights offering is 8.7% of total shares outstanding. End of lock-up period for 36% of HYBE's shares in April - In the midst of all this deal making for HYBE and Ithaca Holdings, there is a crucial factor to consider which is that the lock-up periods for nearly 36% of HYBE's shares end in 15 April 2021 (6 months after IPO), including 34.7% owned by the largest shareholder Bang Si-Hyuk.Overall, we have some mixed views about this big deal between HYBE and Ithaca Holdings. While there are some positives about revenues and geographical diversification, there are some concerns about over payment plus there are continued concerns about whether Ithaca Holdings will be able to produce some top music talents as it has been able to do so in the past decade. In addition, the big shares that could be sold starting this month (end of lock-up period) also raises concerns about more shares being potentially sold by HYBE's insiders. Overall, we remain Negative on HYBE (Big Hit Entertainment). 

HYBE (Big Hit Entertainment) Merges with Ithaca Holdings - "Stuck With U"

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.

Price Gauge
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HYBE (352820 KS)

HYBE Subscription Rights at a Decent Arb Yield: Why Not Trading It

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Korea's New Short Selling Restriction to Close the Loophole for Arb Trading on a Rights Offer

This post details the newly introduced short-selling restriction to close the loophole for arb trading on a rights offer in Korea.

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HYBE (Big Hit Ent) Rights Offer Presents a Nice Setup for a Classic Arb Trade

This post details HYBE (Big Hit Ent)'s ₩440B rights offer, and explains why it presents a nice setup for a classic arb trade.

Sanghyun Park

KOSPI Lock-Up Expirations for Apr-Sep, Feat. Big Hit Ent, Now HYBE

This post has the lock-up expirations on KOSPI from April to September and examines how Big Hit major shareholder's lock-up expiration relates to...

Sanghyun Park

HYBE (Big Hit Entertainment) Merges with Ithaca Holdings - "Stuck With U"

On 2 April, HYBE (formerly called Big Hit Entertainment) announced that it will merge with Ithaca Holdings. This marks one of the largest ever...

Douglas Kim

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