Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>Back on the 2 April, China's <a href="https://www.smartkarma.com/entities/58-com-inc-adr" target="_blank" data-smartkarma-citation="entities:2563:1" rel="noopener">58.Com Inc (WUBA US)</a> received a preliminary, nonbinding <a href="https://sec.report/Document/0001104659-20-042699/" target="_blank" rel="noopener">proposal</a> from Ocean Link Partners, at $27.50 per Class A or Class B ordinary share, or $55/ADS, a 17.88% premium to last close. This was followed on the 20 April with 58.com <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=114974426&amp;type=PDF&amp;symbol=WUBA&amp;companyName=58.com+Inc.+American+Depositary+Shares+each+representing+2+Class+A&amp;formType=6-K&amp;dateFiled=2020-04-30&amp;CK=1525494" target="_blank" rel="noopener">announcing</a> it had received a preliminary &amp; non-binding Offer from the Buyer Group, comprising Ocean Link Partners and Warburg Pincus Asia LLC, General Atlantic Singapore Fund, and Jinbo Yao, 58.com's chairman and chief executive officer. The indicative Offer Price remained at $55/ADS. A definitive Agreement and Plan of Merger was <a href="http://58.investorroom.com/2020-06-15-58-com-Enters-into-a-Definitive-Agreement-for-Going-Private-Transaction" target="_blank" rel="noopener">announced</a> on the 15 June, with the consideration price marginally sweetened to $56/ADS, a 19.9% premium to the undisturbed price.</p>
<p>Under the merger agreement, the Buyer Group has formed a new holding entity, Quantum Bloom Group Ltd (Parent).</p>
<p>Yao entered into a support agreement with the Parent such that Yao will roll over his stake in 58.com (42% of the voting power) into newly-issued shares of Parent. General Atlantic <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115087118&amp;type=PDF&amp;symbol=WUBA&amp;companyName=58.com+Inc.+American+Depositary+Shares+each+representing+2+Class+A&amp;formType=SC+13D%2FA&amp;dateFiled=2020-06-22&amp;CK=1525494" target="_blank" rel="noopener">elected</a> on June 21, 2020 <em>not</em> to roll over its stake (2% of the voting power), electing its shares be cancelled in exchange for the merger consideration. That bumped the financing for the merger by US$400.4mn.</p>
<p>Additionally, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> entered into a rollover agreement with the parent on the <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115079126&amp;type=PDF&amp;symbol=WUBA&amp;companyName=58.com+Inc.+American+Depositary+Shares+each+representing+2+Class+A&amp;formType=SC+13D%2FA&amp;dateFiled=2020-06-17&amp;CK=1525494" target="_blank" rel="noopener">15 June</a>, such that Tencent will roll over its existing stake (28.3% of the voting power) into newly-issued ordinary shares of Parent.</p>
<p>The Merger requires the affirmative vote of two-thirds of 58.com's total voting power (present and via proxy) at an EGM. This will be held on the 7 September - this coming Monday. Yao and General Atlantic will vote their collective 44.02% voting power in favour of the merger. Tencent is not obligated to vote in a specific way under its rollover Agreement. But assuming Tencent does, its 28.3% voting power takes the total to 72.3% - exceeding the two-thirds threshold.</p>
<p>The low-ball offer was not lost on investors. Lawyers Halper Sadeh set up a site for assist investors to "<em>obtain the best possible consideration</em>".</p>
<p>This was followed by proxy advisors reports from both Glass Lewis and ISS recommending shareholder vote AGAINST the proposal. </p>
<p>But this is a done deal. The alternative avenue is the long-dated appraisal rights route.</p>
</div>
<div>
<p>As always, more below the fold.</p>
</div>


Back on the 2 April, China's 58.Com Inc (WUBA US) received a preliminary, nonbinding proposal from Ocean Link Partners, at $27.50 per Class A or Class B ordinary share, or $55/ADS, a 17.88% premium to last close. This was followed on the 20 April with 58.com announcing it had received a preliminary &amp; non-binding Offer from the Buyer Group, comprising Ocean Link Partners and Warburg Pincus Asia LLC, General Atlantic Singapore Fund, and Jinbo Yao, 58.com's chairman and chief executive officer. The indicative Offer Price remained at $55/ADS. A definitive Agreement and Plan of Merger was announced on the 15 June, with the consideration price marginally sweetened to $56/ADS, a 19.9% premium to the undisturbed price.
Under the merger agreement, the Buyer Group has formed a new holding entity, Quantum Bloom Group Ltd (Parent).
Yao entered into a support agreement with the Parent such that Yao will roll over his stake in 58.com (42% of the voting power) into newly-issued shares of Parent. General Atlantic elected on June 21, 2020 not to roll over its stake (2% of the voting power), electing its shares be cancelled in exchange for the merger consideration. That bumped the financing for the merger by US$400.4mn.
Additionally, Tencent Holdings (700 HK) entered into a rollover agreement with the parent on the 15 June, such that Tencent will roll over its existing stake (28.3% of the voting power) into newly-issued ordinary shares of Parent.
The Merger requires the affirmative vote of two-thirds of 58.com's total voting power (present and via proxy) at an EGM. This will be held on the 7 September - this coming Monday. Yao and General Atlantic will vote their collective 44.02% voting power in favour of the merger. Tencent is not obligated to vote in a specific way under its rollover Agreement. But assuming Tencent does, its 28.3% voting power takes the total to 72.3% - exceeding the two-thirds threshold.
The low-ball offer was not lost on investors. Lawyers Halper Sadeh set up a site for assist investors to "obtain the best possible consideration".
This was followed by proxy advisors reports from both Glass Lewis and ISS recommending shareholder vote AGAINST the proposal. 
But this is a done deal. The alternative avenue is the long-dated appraisal rights route.


As always, more below the fold.


58.com: Foregone Conclusion Amidst Proxy Advisor Pushback

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div>
<p><a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a> plans to raise up to USD 30bn via a dual listing in both Hong Kong Exchange and Shanghai STAR board. </p>
<p>We have provided our early thoughts of Ant Group as early as 2018. The details provided in the prospectus give investors a much more comprehensive understanding of the company, particularly the non-payment business. </p>
<p>In our previous notes, links to which are below, we have covered the company's background and its performance.</p>
<p>In this note, we will focus on some of the finer points of the financial statements. </p>
<p><strong><em>I have labelled this insight bearish because I'll talk about some of the not so pleasant aspects of the deal and not because I'm bearish on the deal.</em></strong></p>
</div><div><div><h3>Our previous coverage on Ant Group</h3></div></div><div><ul style="list-style-type: disc;">
<li dir="ltr"><p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-what-s-new-about-the-listing-news" target="_blank" rel="noopener">Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors</a></p></li>
<li dir="ltr"><p><a href="https://www.smartkarma.com/insights/ant-financial-ipo-early-thought-understand-the-fintech-empire-growth-and-risk-factors" target="_blank" rel="noopener">Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News</a></p></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-first-take-no-1-fintech-from-all-angles" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles</a></li>
<li dir="ltr"><a href="https://www.smartkarma.com/insights/ant-group-ipo-numbers-suggest-it-s-more-tech-than-financials" target="_blank" rel="noopener">Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials</a></li>
</ul></div>


Ant Financial (1051260D CH) plans to raise up to USD 30bn via a dual listing in both Hong Kong Exchange and Shanghai STAR board. 
We have provided our early thoughts of Ant Group as early as 2018. The details provided in the prospectus give investors a much more comprehensive understanding of the company, particularly the non-payment business. 
In our previous notes, links to which are below, we have covered the company's background and its performance.
In this note, we will focus on some of the finer points of the financial statements. 
I have labelled this insight bearish because I'll talk about some of the not so pleasant aspects of the deal and not because I'm bearish on the deal.
Our previous coverage on Ant Group
Ant Financial IPO Early Thought: Understand the Fintech Empire, Growth and Risk Factors
Ant Financial (蚂蚁金服) IPO Early Thought: What’s New About the Listing News
Ant Group (蚂蚁集团) IPO First-Take: No. 1 Fintech from All Angles
Ant Group (蚂蚁集团) IPO: Numbers Suggest It’s More Tech than Financials


Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/Questions to Ask - Falling Fees, Margins, Cash Flow

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p><a href="https://www.smartkarma.com/entities/ant-financial-services-group" target="_blank" data-smartkarma-citation="entities:24240:1" rel="noopener">Ant Financial (1051260D CH)</a>/Ant Group is the leading digital payments provider and leading digital finance platform in China based on total payment volume and transaction volume, respectively, according to iResearch and Oliver Wyman. In <a href="https://www.smartkarma.com/insights/ant-group-ipo-initiation-it-s-a-bug-s-life" target="_blank" rel="noopener">our initiation note</a>, we stated that Ant is a unique market-leading asset with attractive fundamentals.</p><div class="content-highlight"><p>In this note, we provide our forecasts and take the first look at Ant's valuation. Ant is seeking a valuation of $200-300 billion, according to various press reports.  Overall, based on our forecasts and valuation analysis, we think that the rumoured IPO valuation range can be justified.</p></div>

Ant Financial (1051260D CH)/Ant Group is the leading digital payments provider and leading digital finance platform in China based on total payment volume and transaction volume, respectively, according to iResearch and Oliver Wyman. In our initiation note, we stated that Ant is a unique market-leading asset with attractive fundamentals.In this note, we provide our forecasts and take the first look at Ant's valuation. Ant is seeking a valuation of $200-300 billion, according to various press reports.  Overall, based on our forecasts and valuation analysis, we think that the rumoured IPO valuation range can be justified.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<p><a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK) </a>met the rally target at 460 where we touted turning short for a harder downside pressure test below 510.</p><p>Tencent met our 460 short target after failing to rally in line with the likes of BABA which made a new high in the face of NDX strength. Regional tech now coming under more pressure. This fourth rejection at 460 will place a heavier bias once below 510.</p><p>This is a follow up to the August 10 insight <a href="https://www.smartkarma.com/insights/tencent-510-support-pivot-pressure-sets-up-a-fade-trade" target="_blank" data-smartkarma-citation="insights:42005" rel="noopener">Tencent 510 Support Pivot Pressure Sets up a Fade Trade</a> that outlined the long trade from 510 to 560 to reverse to short with a stop above 565.</p>

Tencent Holdings (700 HK) met the rally target at 460 where we touted turning short for a harder downside pressure test below 510.Tencent met our 460 short target after failing to rally in line with the likes of BABA which made a new high in the face of NDX strength. Regional tech now coming under more pressure. This fourth rejection at 460 will place a heavier bias once below 510.This is a follow up to the August 10 insight Tencent 510 Support Pivot Pressure Sets up a Fade Trade that outlined the long trade from 510 to 560 to reverse to short with a stop above 565.

Tencent Four Tops and Short Fade Trade Underway

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>What WHO might have found in Wuhan </li>
<li>The upstart at 40</li>
<li>Lovers splash out on Chinese Valentine’s Day </li>
<li>Aircraft-carrier killers and soybean orders</li>
<li>No pilots or drivers needed</li>
</ul><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
What WHO might have found in Wuhan 
The upstart at 40
Lovers splash out on Chinese Valentine’s Day 
Aircraft-carrier killers and soybean orders
No pilots or drivers needed
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Wuhan/Shenzhen/Consumption/US-China/Self-Drive

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

58.com: Foregone Conclusion Amidst Proxy Advisor Pushback

On the 2 April, China's 58.Com Inc (WUBA US) received a preliminary, nonbinding proposal from Ocean Link Partners, at $27.50 per Class A or Class...

David Blennerhassett

Ant Group (蚂蚁集团) Pre-IPO: Things to Clarify/Questions to Ask - Falling Fees, Margins, Cash Flow

Ant Group filed its prospectus and kick-started its IPO to raise up to USD 30 billion to list on both Hong Kong Exchange and Shanghai STAR...

Sumeet Singh

Ant Group IPO: Valuation First Look

Ant Financial (1051260D CH)/Ant Group is the leading digital payments provider and leading digital finance platform in China based on total payment...

Arun George

Tencent Four Tops and Short Fade Trade Underway

Tencent met our 460 short target after failing to rally in line with the likes of BABA and US tech, amid a negative HK macro cycle.

Thomas Schroeder

Wuhan/Shenzhen/Consumption/US-China/Self-Drive

China News That Matters What WHO might have found in Wuhan The upstart at 40 Lovers splash out on Chinese Valentine’s Day Aircraft-carrier...

Diana Choyleva

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52-week Range

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