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

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

<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

<ul>
<li>On 17 July, SK Innovation (096770 KS) officially announced a merger with SK E&amp;S. The merger ratio between SK Innovation and SK E&amp;S has been set at 1 to 1.1917417.</li>
<li>We believe this is the wrong timing for this merger from SK Innovation's point of view. SK Innovation is trading at near three year lows.</li>
<li>This merger is likely to generate backlash from KKR which holds SK E&amp;S redeemable convertible preferred stock (RCPS) worth 3.1 trillion won.</li>
</ul>


On 17 July, SK Innovation (096770 KS) officially announced a merger with SK E&amp;S. The merger ratio between SK Innovation and SK E&amp;S has been set at 1 to 1.1917417.
We believe this is the wrong timing for this merger from SK Innovation's point of view. SK Innovation is trading at near three year lows.
This merger is likely to generate backlash from KKR which holds SK E&amp;S redeemable convertible preferred stock (RCPS) worth 3.1 trillion won.


SK Innovation's Merger with SK E&S: Bad Timing for SK Innovation and Higher Risks from RCPS

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.

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SK Innovation (096770 KS)

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

SK Innovation's Merger with SK E&S: Bad Timing for SK Innovation and Higher Risks from RCPS

This merger between SK Innovation and SK E&S is likely to be value-destroying from SK Innovation's viewpoint. It is also likely to generate...

Douglas Kim

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