Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Cross Asset Strategy

<ul>
<li>In 2025, the NPS could purchase significant amounts of Korean stocks (at least 25 trillion won) which could act as support in the domestic stock market. </li>
<li>At the end of September 2024, NPS's domestic stock portfolio was 12.7% of its total assets, a 2.2% lower than NPS's domestic stocks target at the end of 2025 (14.9%).</li>
<li>The top five net purchases by the NPS and local pension funds of Korean stocks in the past one month include Samsung Electronics, Kakao, SK Innovation, Hyundai Motor, and SEMCO.</li>
</ul>


In 2025, the NPS could purchase significant amounts of Korean stocks (at least 25 trillion won) which could act as support in the domestic stock market. 
At the end of September 2024, NPS's domestic stock portfolio was 12.7% of its total assets, a 2.2% lower than NPS's domestic stocks target at the end of 2025 (14.9%).
The top five net purchases by the NPS and local pension funds of Korean stocks in the past one month include Samsung Electronics, Kakao, SK Innovation, Hyundai Motor, and SEMCO.


NPS: Portfolio Rebalance Could Lead to Buying At Least 25 Trillion Won in Korean Stocks in 2025

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>NPS's opposition suggests a likely vote against the merger, but if they plan to exercise appraisal rights, they might abstain to preserve that option.</li>
<li>NPS typically exercises appraisal rights when the spread exceeds 5%, as seen in past mergers like Celltrion and Samsung. They didn’t act when the spread was below 5%.</li>
<li>The key question is whether SK Innovation can boost its stock price to avoid NPS exercising rights. Otherwise, the merger may pass, but the stock could drop significantly.</li>
</ul>


NPS's opposition suggests a likely vote against the merger, but if they plan to exercise appraisal rights, they might abstain to preserve that option.
NPS typically exercises appraisal rights when the spread exceeds 5%, as seen in past mergers like Celltrion and Samsung. They didn’t act when the spread was below 5%.
The key question is whether SK Innovation can boost its stock price to avoid NPS exercising rights. Otherwise, the merger may pass, but the stock could drop significantly.


NPS Effectively Decides to Exercise Appraisal Rights Against SK Innovation: Trading Considerations

<ul>
<li>NPS will vote against the merger between SK Innovation and SK E&amp;S, mainly due to significant concerns about destroying shareholder value (especially for SK Innovation shareholders). </li>
<li>Sustinvest also recommended that institutional investors vote against this merger, citing that the merger ratio between SK Innovation and SK E&amp;S is disadvantageous to SK Innovation's general shareholders.</li>
<li>If NPS exercises its appraisal rights, this could put a knife in the wheel of the M&amp;A merger between SK Innovation and SK E&amp;S. </li>
</ul>


NPS will vote against the merger between SK Innovation and SK E&amp;S, mainly due to significant concerns about destroying shareholder value (especially for SK Innovation shareholders). 
Sustinvest also recommended that institutional investors vote against this merger, citing that the merger ratio between SK Innovation and SK E&amp;S is disadvantageous to SK Innovation's general shareholders.
If NPS exercises its appraisal rights, this could put a knife in the wheel of the M&amp;A merger between SK Innovation and SK E&amp;S. 


NPS Will Vote Against the Merger Between SK Innovation and SK E&S

<ul>
<li>SK Innovation is considering on using its treasury shares to inject capital into its EV battery making subsidiary SK On. </li>
<li>The appraisal rights exercise price is 111,943 won per share (15% higher than current price). Many minority shareholders are likely to exercise their appraisal rights in SK Innovation.</li>
<li>We remain Bearish on SK Innovation. We continue to be negative on the SK Innovation and SK E&amp;S merger. Plus, we are concerned about the continued weakness at SK On. </li>
</ul>


SK Innovation is considering on using its treasury shares to inject capital into its EV battery making subsidiary SK On. 
The appraisal rights exercise price is 111,943 won per share (15% higher than current price). Many minority shareholders are likely to exercise their appraisal rights in SK Innovation.
We remain Bearish on SK Innovation. We continue to be negative on the SK Innovation and SK E&amp;S merger. Plus, we are concerned about the continued weakness at SK On. 


SK Innovation: Considering on Using Its Treasury Shares to Inject Capital into SK On

<ul>
<li>Exceeding the ceiling doesn’t cancel the merger; SK Innovation can still proceed. With their decision confirmed, focus should shift to appraisal rights flows rather than cancellation risk.</li>
<li>We should focus on flow trading given the notable exercise size and potential for unprecedented market activity if institutions, including the NPS, exercise their rights due to the juicy premium.</li>
<li>The large exercise size and SK Innovation's KOSPI large-cap status may create unique flow trading opportunities, with potential repurchases after new shares list.</li>
</ul>


Exceeding the ceiling doesn’t cancel the merger; SK Innovation can still proceed. With their decision confirmed, focus should shift to appraisal rights flows rather than cancellation risk.
We should focus on flow trading given the notable exercise size and potential for unprecedented market activity if institutions, including the NPS, exercise their rights due to the juicy premium.
The large exercise size and SK Innovation's KOSPI large-cap status may create unique flow trading opportunities, with potential repurchases after new shares list.


The Unusual Flow Trading Development Caused by SK Innovation's Appraisal Rights Premium

South Korea

SK Innovation Co., Ltd. refines, markets, and distributes oil.  The Company produces a variety of petroleum products, such as gasoline, kerosene, liquefied petroleumgas (LPG), and diesel oil.  SK Energy also manufactures petrochemical p roducts, including paraxylene, synthetic resins, styrene monomer, and ethylene.

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

SK Innovation (096770 KS)

NPS: Portfolio Rebalance Could Lead to Buying At Least 25 Trillion Won in Korean Stocks in 2025

In 2025, the NPS could purchase significant amounts of Korean stocks (at least 25 trillion won) which could act as support in the domestic stock...

Douglas Kim

NPS Effectively Decides to Exercise Appraisal Rights Against SK Innovation: Trading Considerations

The merger between SK Innovation and SK E&S was approved at the shareholders' meeting, with a higher-than-expected attendance of nearly 70%. This...

Sanghyun Park

NPS Will Vote Against the Merger Between SK Innovation and SK E&S

NPS will vote against the merger between SK Innovation and SK E&S, mainly due to significant concerns about destroying shareholder value...

Douglas Kim

SK Innovation: Considering on Using Its Treasury Shares to Inject Capital into SK On

On 8 August, it was reported in the local media that SK Innovation (096770 KS) is considering on using its treasury shares to inject capital into...

Douglas Kim

The Unusual Flow Trading Development Caused by SK Innovation's Appraisal Rights Premium

This post examines the unusual flow trading developments likely triggered by the sudden surge in SK Innovation's appraisal rights premium.

Sanghyun Park

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)