Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<ul>
<li>Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. </li>
<li>They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. </li>
<li>In addition, the information regarding other bids and alternatives was a little surprising to us.</li>
</ul>


Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. 
They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. 
In addition, the information regarding other bids and alternatives was a little surprising to us.


Toshiba – Thoughts On The Tender Opinion

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>A Bloomberg <a href="https://www.bloomberg.co.jp/news/articles/2023-02-24/RQ0E9ADWLU6801" target="_blank" rel="noopener">article</a> out Friday evening suggests the JIP Consortium funding plan submitted as the final package to <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> is no longer secure.</li>
<li>Apparently <a href="https://www.smartkarma.com/entities/orix-corp" target="_blank" data-smartkarma-citation="entities:9936:1" rel="noopener">Orix Corp (8591 JP)</a>, which with <a href="https://www.smartkarma.com/entities/rohm-co-ltd" target="_blank" data-smartkarma-citation="entities:2953:1" rel="noopener">ROHM Co Ltd (6963 JP)</a> was planning to invest equity and pref for total ¥300bn, wants to lower its investment to ¥200bn.</li>
<li>Other equity tranche participants apparently want to reduce exposure as well. </li>
</ul>


A Bloomberg article out Friday evening suggests the JIP Consortium funding plan submitted as the final package to Toshiba Corp (6502 JP) is no longer secure.
Apparently Orix Corp (8591 JP), which with ROHM Co Ltd (6963 JP) was planning to invest equity and pref for total ¥300bn, wants to lower its investment to ¥200bn.
Other equity tranche participants apparently want to reduce exposure as well. 


Toshiba (6502) - Funding Unsecured!  (This Is Getting To Be a Habit)

<ul>
<li>An article this morning in the Yomiuri suggested JIC was bidding, even though they have not been in any "lists of 8 bidders" I have seen. The market yawned. </li>
<li>An article this evening says bidders are offering "up to ¥7,000/share" but there is a range of pricing and conditions. Not surprising, but we know little. </li>
<li>Shareholder structure matters. This has been event-y for a long time so I expect not many new buyers are ready to come in. This just shifts the range. And risk.</li>
</ul>


An article this morning in the Yomiuri suggested JIC was bidding, even though they have not been in any "lists of 8 bidders" I have seen. The market yawned. 
An article this evening says bidders are offering "up to ¥7,000/share" but there is a range of pricing and conditions. Not surprising, but we know little. 
Shareholder structure matters. This has been event-y for a long time so I expect not many new buyers are ready to come in. This just shifts the range. And risk.


Oops, Price Leaks Early on Toshiba - Now We Have To Think About Probability

<ul>
<li>Raymond Zage's letter was super interesting in terms of its nuance, as discussed in <a href="https://www.smartkarma.com/insights/toshiba-board-ructions-as-independent-director-goes-rogue" target="_blank" data-smartkarma-citation="insights:67080" rel="noopener">Toshiba Board Ructions as Independent Director Goes Rogue</a>. </li>
<li>In <a href="https://www.smartkarma.com/insights/toshiba-coin-toss-is-neither-heads-nor-tails-as-both-proposals-fail" target="_blank" data-smartkarma-citation="insights:67405" rel="noopener">Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail</a>, I discussed that this opens the door to exploring combinations of ideas. </li>
<li>Today Effissimo filed an amended LSR to say they'd sell their shares to a Bain Tender Offer if launched. The statement, and the break clause are informative, and more nuanced.</li>
</ul>


Raymond Zage's letter was super interesting in terms of its nuance, as discussed in Toshiba Board Ructions as Independent Director Goes Rogue. 
In Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail, I discussed that this opens the door to exploring combinations of ideas. 
Today Effissimo filed an amended LSR to say they'd sell their shares to a Bain Tender Offer if launched. The statement, and the break clause are informative, and more nuanced.


Toshiba (6502) - Effissimo's Pledge Isn't One. It Is a Signalling Device.

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. This affects both TSE-1 incumbents and new entrants (depending on the date of entry). Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. Last April, 71 constituents saw their liquidity factors removed causing an increase in their respective FFWs used for index calculation resulting in a TOPIX upweight.This situation opens up interesting opportunities for a basket trade. Below is a discussion regarding the key details of TSE's FFW Calculation Methodology and the candidate stocks which could potentially experience a change in the application of the liquidity factor (including some surprisingly big names).

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. This affects both TSE-1 incumbents and new entrants (depending on the date of entry). Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. Last April, 71 constituents saw their liquidity factors removed causing an increase in their respective FFWs used for index calculation resulting in a TOPIX upweight.This situation opens up interesting opportunities for a basket trade. Below is a discussion regarding the key details of TSE's FFW Calculation Methodology and the candidate stocks which could potentially experience a change in the application of the liquidity factor (including some surprisingly big names).   

TOPIX Index Upweights: The Big April Basket 2021

Japan

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

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Toshiba Corp (6502 JP)

Toshiba – Thoughts On The Tender Opinion

Information regarding other bids and alternatives in Toshiba's board opinion on JIP's bid was a little surprising to us.

Mio Kato

Toshiba (6502) - Funding Unsecured! (This Is Getting To Be a Habit)

An article out Friday after the close suggests Orix and other JIP equity consortium partners want to reduce their investment size. It's not clear...

Travis Lundy

Oops, Price Leaks Early on Toshiba - Now We Have To Think About Probability

Toshiba (6502) gets the "bidders might pay up to X" article a lot earlier than I expected. It is non-binding now, and no due dili has been done....

Travis Lundy

Toshiba (6502) - Effissimo's Pledge Isn't One. It Is a Signalling Device.

Effissimo filed a small LSR amendment.No change in sharecount. But the text indicated a pledge to support a Bain tender offer. It's a nuanced...

Travis Lundy

TOPIX Index Upweights: The Big April Basket 2021

TOPIX does an annual exercise to adjust Liquidity Factor. The time for trades around that is upon us. This insight looks at the best trade around...

Janaghan Jeyakumar, CFA

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