Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<ul>
<li>The merger between SK Inc and SK Materials will officially end next Monday (December 27) with the listing of new stocks.</li>
<li>1,377,867 shares exercised appraisal rights. As a result, the number of new shares issued decreased to 3,789,032, pulling down the total shares to 74,149,329.</li>
<li>Passive flow-wise, we will likely see an outflow of about 0.15x ADTV at the close on the trading day (November 26) preceding the listing date.</li>
</ul>


The merger between SK Inc and SK Materials will officially end next Monday (December 27) with the listing of new stocks.
1,377,867 shares exercised appraisal rights. As a result, the number of new shares issued decreased to 3,789,032, pulling down the total shares to 74,149,329.
Passive flow-wise, we will likely see an outflow of about 0.15x ADTV at the close on the trading day (November 26) preceding the listing date.


SK Inc Flow Tracking for New Shares Listing on Dec 27

<ul>
<li>The KRX officially unveiled the results of the December rebalancing for KOSDAQ 150. We have <strong>a total of 15 additions and 15 deletions</strong> from the regular rebalancing.</li>
<li>The following trade-suitable stocks among the additions are <strong>Bioneer Corp, TK Chemical, AptaBio Therapeutics, Cellid, and Ecopro HN</strong>.</li>
<li>Among the deletions, these are worthy of our attention: <strong>SK Materials, Crystal Genomics, G-TreeBNT, and Icure Pharmaceutical</strong>
</li>
</ul>


The KRX officially unveiled the results of the December rebalancing for KOSDAQ 150. We have a total of 15 additions and 15 deletions from the regular rebalancing.
The following trade-suitable stocks among the additions are Bioneer Corp, TK Chemical, AptaBio Therapeutics, Cellid, and Ecopro HN.
Among the deletions, these are worthy of our attention: SK Materials, Crystal Genomics, G-TreeBNT, and Icure Pharmaceutical



15 Adds & 15 Deletes in KOSDAQ 150 Rebalancing: Passive Impact & Trade Approaches

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<ul>
<li>There are 15 inclusions and 15 exclusions for the <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> at the next rebalance to be implemented at the close on 9 December.</li>
<li>The inclusions were expected but there are a few surprises among the deletions as the Information Technology sector was spared at the expense of the Health Care sector.</li>
<li>Over the last couple of months, the inclusions have given up their early gains versus the deletions. With the announcement made, the inclusions could outperform over the next few weeks.</li>
</ul>


There are 15 inclusions and 15 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the next rebalance to be implemented at the close on 9 December.
The inclusions were expected but there are a few surprises among the deletions as the Information Technology sector was spared at the expense of the Health Care sector.
Over the last couple of months, the inclusions have given up their early gains versus the deletions. With the announcement made, the inclusions could outperform over the next few weeks.


KOSDAQ150 Index Rebalance: Pullback Done; Buy Adds & Sell Deletes

<ul>
<li>Attention is now being drawn on <strong>index rebalancing trading for SK Inc</strong> ahead of the trading suspension of SK Materials' stocks, which begins on November 29.</li>
<li>The KRX will apply <strong>SK Inc's increase in the number of shares</strong> on the start date of the trading suspension (<strong>November 29</strong>), not the new stock listing date (December 27).</li>
<li>Combining the above two, we should expect a passive inflow of about <strong>₩14.4B</strong><strong>at the close on November 2</strong>8, representing <strong>0.30x 30-day ADTV</strong>.</li>
</ul>


Attention is now being drawn on index rebalancing trading for SK Inc ahead of the trading suspension of SK Materials' stocks, which begins on November 29.
The KRX will apply SK Inc's increase in the number of shares on the start date of the trading suspension (November 29), not the new stock listing date (December 27).
Combining the above two, we should expect a passive inflow of about ₩14.4Bat the close on November 28, representing 0.30x 30-day ADTV.


SK Inc Merger: KOSPI 200 Passive Impact at the Close on November 28

<p>The SK Inc/SK Materials merger got shareholder approval from SK Materials shareholders.</p><div class="content-highlight"><p>FYI, SK Inc doesn't need shareholder approval since this qualified as a small-scale merger under the local law.</p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/381/original/Screen+Shot+2021-11-02+at+6.09.51+PM.png?1635892520" class="editor-image img-responsive" data-smartkarma-image-id="239381"></figure></section><div class="content-caption">(SK Materials regulatory filing - Source: KRX KIND)</div><p>The merger got a 77.7% approval rate out of the attending votes at the SK Materials shareholder meeting. But unfortunately, we only know the percentage of dissent votes out of the attending votes. The information regarding the number of attending votes isn't available. So, we are unable to accurately estimate the potential stock purchase cost at this point. </p><div id="ember2418" class="content-caption">
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/612/original/Screen+Shot+2021-11-01+at+10.34.36+AM.png?1635991418" class="editor-image img-responsive" data-smartkarma-image-id="239612"></figure></section><p>(Source: Digital Today)</p>
</div><p>Hence, we have to wait for the stock purchase cost, which ends on November 18. It has to stay below ₩800B, 18.24% of the SO. Otherwise, there is a risk of canceling the merger.</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":"Schedule"}' data-sheets-note="Sang Hyun Park: We have to buy shares until BOD+1 to be eligible to receive stock purchase rights. We then have to notify our dissenting opinion until the end of dissenting opinion notice period.">Schedule</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Inc"}' data-sheets-formula="=R[-15]C[0]">SK Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Materials Co Ltd"}' data-sheets-formula="=R[-12]C[-1]">SK Materials</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Last day to own stock purchase rights"}'>Last day to own stock purchase rights</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44066}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2020. 08. 23</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":44442}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 03</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44442}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 03</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date of shareholder register"}'>Record date of shareholder register</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44445}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 06</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44445}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 09. 06</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dissenting opinion notice"}'>Dissenting opinion notice</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"2021. 09. 06 ~ 09. 23"}'>2021. 09. 06 ~ 09. 23</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"2021. 10. 14 ~ 10. 28"}'>2021. 10. 14 ~ 10. 28</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholder meeting"}'>Shareholder meeting</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44498}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 10. 29</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock purchase right exercise"}'><strong>Stock purchase right exercise</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'><strong>N/A</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"2021. 10. 29 ~ 11. 18"}'><strong>2021. 10. 29 ~ 11. 18</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension"}'>Trade suspension</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"2021. 11. 29 ~ 12. 24"}'>2021. 11. 29 ~ 12. 24</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}'>N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44557}' data-sheets-numberformat='{"1":5,"2":"yyyy. mm. dd","3":1}'>2021. 12. 27</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>How real is this cancellation risk? Well, the spread is approaching 5%. At this much widened spread, I'd say the cancellation risk is pretty real. </p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread - stock purchase"}'>Spread - stock purchase</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Inc"}' data-sheets-formula="=R[-29]C[0]">SK Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Materials Co Ltd"}' data-sheets-formula="=R[-29]C[0]">SK Materials Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":251500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-29]C[0]">₩251,500</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":391900}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-29]C[0]">₩391,900</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Exercise price"}'>Exercise price</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"N/A"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-18]C[0]">N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":415751}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-17]C[-1]">₩415,751</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transfer income tax"}'>Transfer income tax</td>
<td style="text-align: right;" data-sheets-value='{"1":5,"5":{"1":3,"2":8,"3":[{"1":2,"2":"MULTIPLY"},{"1":3,"3":1},{"1":2,"2":"N/A"},{"1":5,"5":{"1":9,"2":404}},{"1":5,"5":{"1":9,"2":403}}]}}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[16]C[0]/R[9]C[0]">N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":5192.22}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[16]C[0]/R[9]C[0]">₩5,192</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Shares"}'>- Shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='{"1":2,"2":"#,##0"}' data-sheets-formula="=R[8]C[0]">N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":10000}' data-sheets-numberformat='{"1":2,"2":"#,##0"}' data-sheets-formula="=R[8]C[0]">10,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Tax-adj. exercise price"}'>Tax-adj. exercise price</td>
<td style="text-align: right;" data-sheets-value='{"1":5,"5":{"1":3,"2":8,"3":[{"1":2,"2":"MULTIPLY"},{"1":3,"3":1},{"1":2,"2":"N/A"},{"1":5,"5":{"1":9,"2":404}},{"1":5,"5":{"1":9,"2":403}}]}}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]-R[-2]C[0]">N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":410558.78}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]-R[-2]C[0]">₩410,559</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Spread"}'>Spread</td>
<td style="text-align: right;" data-sheets-value='{"1":5,"5":{"1":3,"2":8,"3":[{"1":2,"2":"MULTIPLY"},{"1":3,"3":1},{"1":2,"2":"N/A"},{"1":5,"5":{"1":9,"2":404}},{"1":5,"5":{"1":9,"2":403}}]}}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-1]C[0]-R[-34]C[0])/R[-34]C[0]">N/A</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.047611074253636206}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-1]C[0]-R[-5]C[0])/R[-5]C[0]">4.76%</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 magic number is 18.24% of the shares outstanding. 65% of the SO are locked. So, the key is the remaining 35%. Of this, the 5% held by the NPS will exercise the appraisal rights as the NPS clearly said that it would do so if the share price stays below the exercise price. For this, the NPS didn't even attend the EGM to preserve its appraisal rights. So, we only need about 13~14% out of the 36% held by minority shareholders to break the ceiling. Even considering the shares changing hands August 23rd (the last day to own the stock purchase rights), it doesn't seem to me that reaching 13~14% out of the 36% would be terribly challenging.</p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholding"}'>Shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Materials Co Ltd"}' data-sheets-formula="=R[-23]C[0]">SK Materials Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Major shareholder"}'>Major shareholder</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4911}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>49.12%</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":0.1507}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>15.07%</td>
</tr>
<tr>
<td><strong>: Total</strong></td>
<td style="text-align: right;"><strong>64.19%</strong></td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NPS"}'><strong>NPS</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Less than 5%"}'><strong>Less than 5%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Minority shareholders"}'><strong>Minority shareholders</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.3581000000000001}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=1-sum(R[-5]C[0]:R[-1]C[0])"><strong>35.81%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Foreign"}'>- Foreign</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.169}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>16.90% (as of today)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Local institutional"}'>- Local institutional</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.05}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>5.00% (estimated)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Local retail"}'>- Local retail</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.13910000000000006}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=1-sum(R[-8]C[0]:R[-4]C[0])-sum(R[-2]C[0]:R[-1]C[0])">13.91% (estimated)</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: FnGuide"}'>Source: KRX &amp; FnGuide</td></tr>
</tbody>
</table>

The SK Inc/SK Materials merger got shareholder approval from SK Materials shareholders.FYI, SK Inc doesn't need shareholder approval since this qualified as a small-scale merger under the local law.(SK Materials regulatory filing - Source: KRX KIND)The merger got a 77.7% approval rate out of the attending votes at the SK Materials shareholder meeting. But unfortunately, we only know the percentage of dissent votes out of the attending votes. The information regarding the number of attending votes isn't available. So, we are unable to accurately estimate the potential stock purchase cost at this point. 
(Source: Digital Today)
Hence, we have to wait for the stock purchase cost, which ends on November 18. It has to stay below ₩800B, 18.24% of the SO. Otherwise, there is a risk of canceling the merger.







Schedule
SK Inc
SK Materials


Last day to own stock purchase rights
N/A
2020. 08. 23


Ex-rights date
2021. 09. 03
2021. 09. 03


Record date of shareholder register
2021. 09. 06
2021. 09. 06


Dissenting opinion notice
2021. 09. 06 ~ 09. 23
2021. 10. 14 ~ 10. 28


Shareholder meeting
N/A
2021. 10. 29


Stock purchase right exercise
N/A
2021. 10. 29 ~ 11. 18


Trade suspension
N/A
2021. 11. 29 ~ 12. 24


Listing
N/A
2021. 12. 27

Source: DART

How real is this cancellation risk? Well, the spread is approaching 5%. At this much widened spread, I'd say the cancellation risk is pretty real. 







Spread - stock purchase
SK Inc
SK Materials Co Ltd


Current price
₩251,500
₩391,900


Exercise price
N/A
₩415,751


Transfer income tax
N/A
₩5,192


- Shares
N/A
10,000


Tax-adj. exercise price
N/A
₩410,559


Spread
N/A
4.76%

Source: DART &amp; KRX

The magic number is 18.24% of the shares outstanding. 65% of the SO are locked. So, the key is the remaining 35%. Of this, the 5% held by the NPS will exercise the appraisal rights as the NPS clearly said that it would do so if the share price stays below the exercise price. For this, the NPS didn't even attend the EGM to preserve its appraisal rights. So, we only need about 13~14% out of the 36% held by minority shareholders to break the ceiling. Even considering the shares changing hands August 23rd (the last day to own the stock purchase rights), it doesn't seem to me that reaching 13~14% out of the 36% would be terribly challenging.






Shareholding
SK Materials Co Ltd


Major shareholder
49.12%


Treasury shares
15.07%


: Total
64.19%



NPS
Less than 5%


Minority shareholders
35.81%


- Foreign
16.90% (as of today)


- Local institutional
5.00% (estimated)


- Local retail
13.91% (estimated)

Source: KRX &amp; FnGuide



SK Swap Arb: Cancellation Risk Assessment & Long/Short Setup Opportunities

South Korea

SK Materials Co Ltd. specializes in producing and distributing specialty gas.  The Company's main products include NF3 (Nitrogen Trifluoride) for semiconductor and LCD, SiH4 (Monosilane) for solar cells, WF6 (Tungsten Hexafluoride) and DCS (Dichlorosilane).

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SK Materials (036490 KS)

SK Inc Flow Tracking for New Shares Listing on Dec 27

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Sanghyun Park

KOSDAQ150 Index Rebalance: Pullback Done; Buy Adds & Sell Deletes

There are 15 changes for the KOSDAQ150 index in December. The impact on the deletions is larger than that on the inclusions. A long adds/short...

Brian Freitas

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This post previews the passive inflow for SK Inc due to the merger with SK Materials, which is supposed to occur at the close on November 28.

Sanghyun Park

SK Swap Arb: Cancellation Risk Assessment & Long/Short Setup Opportunities

This post assesses the cancellation risk of the SK Inc/SK Materials merger swap event and discusses long/short setup opportunities that may still...

Sanghyun Park

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