European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Spreads have generally tightened across our liquid universe, with some notorious exceptions such as BMW, Sixt and Volkswagen.</li>
<li>Recommendations Long ords / short prefs: Fuchs Petrolub, Grifols, Henkel, Handelsbanken, Investor AB.</li>
<li>Recommendations Long prefs / short ords: BMW, Roche, Schroders, Sixt, Telecom Italia, Volkswagen.</li>
</ul>


Spreads have generally tightened across our liquid universe, with some notorious exceptions such as BMW, Sixt and Volkswagen.
Recommendations Long ords / short prefs: Fuchs Petrolub, Grifols, Henkel, Handelsbanken, Investor AB.
Recommendations Long prefs / short ords: BMW, Roche, Schroders, Sixt, Telecom Italia, Volkswagen.


Liquid Universe of European Ordinary and Preferred Shares: December Report

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.

Equity Capital Markets

LG Energy Solution / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lg-energy-solution" target="_blank" data-smartkarma-citation="entities:33464:1" rel="noopener">LG Energy Solution (LGENERGY KS)</a> is a leading EV battery manufacturer. It is pre-marketing an IPO to raise up to $10.8 billion, which would be South Korea’s largest-ever listing.  </li>
<li>LGES is offering 42.5 million shares with a primary/secondary split of 80/20. Pre-marketing will run until 17 December.  </li>
<li>LGES has attractive fundamentals with a strong backlog, healthy revenue growth and improving margins (recall provisions have peaked). </li>
</ul>



LG Energy Solution (LGENERGY KS) is a leading EV battery manufacturer. It is pre-marketing an IPO to raise up to $10.8 billion, which would be South Korea’s largest-ever listing.  
LGES is offering 42.5 million shares with a primary/secondary split of 80/20. Pre-marketing will run until 17 December.  
LGES has attractive fundamentals with a strong backlog, healthy revenue growth and improving margins (recall provisions have peaked). 


LG Energy Solution IPO Initiation: Amp My Ride

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<ul>
<li>Global Autos underweight hits a record high among active Global Funds</li>
<li>
<a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> the driving force behind the move, with only 12.7% of managers invested as index weights soared.</li>
<li>Tesla is now chronically under-owned compared to its own index weight, making it the largest drag on performance for the average active global fund this year.</li>
</ul>


Global Autos underweight hits a record high among active Global Funds

Tesla Motors (TSLA US) the driving force behind the move, with only 12.7% of managers invested as index weights soared.
Tesla is now chronically under-owned compared to its own index weight, making it the largest drag on performance for the average active global fund this year.


Global Autos Hit Record Underweight: Tesla Piles on the Pain

<ul>
<li>
Spreads have generally tightened across our liquid universe, with some notorious exceptions such as Volkswagen and Grifols.</li>
<li>Recommendations long ords / short prefs: Henkel, Fuchs Petrolub, Telecom Italia, Grifols, Handelsbanken, Investor AB.</li>
<li>Recommendations long prefs / short ords: BMW, Volkswagen, Roche, Schroders.</li>
</ul>



Spreads have generally tightened across our liquid universe, with some notorious exceptions such as Volkswagen and Grifols.
Recommendations long ords / short prefs: Henkel, Fuchs Petrolub, Telecom Italia, Grifols, Handelsbanken, Investor AB.
Recommendations long prefs / short ords: BMW, Volkswagen, Roche, Schroders.


Liquid Universe of European Ordinary and Preferred Shares: November Report

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

The sound bite in the last week was <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a> surpassing <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a> as the world's most valuable company. 
Yet 13 years ago, almost to the day, the world's largest company was <a href="https://www.smartkarma.com/entities/volkswagen-ag" target="_blank" data-smartkarma-citation="entities:21738:1" rel="noopener">Volkswagen (VOW GR)</a>. For one day at least. 
Volkswagen, like a number of large listed companies in Germany, has two classes of shares - ordinary shares, which are carry voting rights, and preference shares, which don't, but are income paying. Below is the ord premium over prefs for the last 18 years.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/499/original/image_23964649881635928119230.png?1635928120" class="editor-image img-responsive" data-smartkarma-image-id="239499"></figure>
That extraordinary spike occurred on the 28 October 2008. Just as global markets were imploding. 
Around this time <a href="https://www.smartkarma.com/entities/porsche-automobil-holding-se" target="_blank" data-smartkarma-citation="entities:21691:1" rel="noopener">Porsche Automobil Holding Se (PAH3 GR)</a> held ~35% in VW - the ords - having first taken a 20% stake in 2005, then to 30% in early 2007, triggering a mandatory offer. In March 2008, Porsche's supervisory board gave the green light to hold 50%. 
The ord premium oscillated between ~27%-55% in the early noughts until around 2006 when Porsche began building its stake.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/503/original/image_70873068291635928736842.png?1635928739" class="editor-image img-responsive" data-smartkarma-image-id="239503"></figure>
This escalating premium can also be illustrated by the bifurcation in the prices of the two share classes.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/520/original/image_637451579121635932198816.png?1635932199" class="editor-image img-responsive" data-smartkarma-image-id="239520"></figure>
The arbitrage  - short the ords, long the prefs - appeared a "riskless trade". And still, the ord premium expanded, closing at a 400+% on the 16 October, before showing some semblance of normalcy and retracing to 247% on the 21 October.
Porsche had made no public announcement about any further share acquisition since the 17 September when it held <a href="https://www.porsche-se.com/en/news/press-releases/details/news/detail/News/porsche-increases-its-vw-stake-to-3514-per-cent-1" target="_blank" rel="noopener">35.14%</a>.  On Sunday the 26 October, it <a href="https://www.porsche-se.com/en/news/press-releases/details/news/detail/News/porsche-heads-for-domination-agreement-1" target="_blank" rel="noopener">announced</a>:
<blockquote>
Due to the dramatic distortions on the financial markets Porsche Automobil Holding SE, Stuttgart, has decided over the weekend to disclose its holdings in shares and hedging positions related to the takeover of Volkswagen AG, Wolfsburg. At the end of last week Porsche SE held 42.6 per cent of the Volkswagen ordinary shares and in addition 31.5 per cent in so called cash settled options relating to Volkswagen ordinary shares to hedge against price risks, representing a total of 74.1 per cent.
</blockquote>
Then that sinking feeling: Porsche holds 74.1%, Lower Saxony 20%, leaving ~6% of ordinary shares in the market to buy. Yet an estimated 12% of the ord shares were short sold. It wasn't possible for all short-sellers to buy back shares and close their positions.
VW touched $999/share on the 28 October,  before finally coming back (ostensibly from the moon) to earth, belatedly helped by Porsche providing 5% to short-sellers (despite <a href="https://www.porsche-se.com/en/news/press-releases/details/news/detail/News/short-sellers-responsible-for-extreme-price-movements-in-volkswagen-ordinary-shares-1" target="_blank" rel="noopener">blaming</a> the shorts for the extreme price movements).
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/516/original/image_468353378111635930921766.png?1635930922" class="editor-image img-responsive" data-smartkarma-image-id="239516"></figure>
Porsche subsequently cleared 50% in VW's ordinary shares, but not only lacked the funding to take its stake all the way to 75% - via the options - it had also borrowed heavily to build that 50% stake in VW, to the point the iconic car brand had to stave off possible bankruptcy.
Short-sellers lost around US$20bn which has largely fallen on deaf ears in the <a href="https://www.courthousenews.com/investors-lose-suit-over-porsches-short-squeeze/" target="_blank" rel="noopener">courts</a>. Porsche's CEO Wendelin Wiedeking was booted out. And Ferdinand Piëch, Ferdinand Porsche's grandson, former CEO, then chairman of VW, was sitting pretty as he and family held 50% of the voting rights in Porsche SE. 
The ords moved into negative territory following the carnage, then roughly hugged parity for a few years. The ord premium is on the run again. Time to get short?
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/239/515/original/image_948776569101635930730635.png?1635930743" class="editor-image img-responsive" data-smartkarma-image-id="239515"></figure>

The sound bite in the last week was Microsoft Corp (MSFT US) surpassing Apple Inc (AAPL US) as the world's most valuable company. 
Yet 13 years ago, almost to the day, the world's largest company was Volkswagen (VOW GR). For one day at least. 
Volkswagen, like a number of large listed companies in Germany, has two classes of shares - ordinary shares, which are carry voting rights, and preference shares, which don't, but are income paying. Below is the ord premium over prefs for the last 18 years.

That extraordinary spike occurred on the 28 October 2008. Just as global markets were imploding. 
Around this time Porsche Automobil Holding Se (PAH3 GR) held ~35% in VW - the ords - having first taken a 20% stake in 2005, then to 30% in early 2007, triggering a mandatory offer. In March 2008, Porsche's supervisory board gave the green light to hold 50%. 
The ord premium oscillated between ~27%-55% in the early noughts until around 2006 when Porsche began building its stake.

This escalating premium can also be illustrated by the bifurcation in the prices of the two share classes.

The arbitrage  - short the ords, long the prefs - appeared a "riskless trade". And still, the ord premium expanded, closing at a 400+% on the 16 October, before showing some semblance of normalcy and retracing to 247% on the 21 October.
Porsche had made no public announcement about any further share acquisition since the 17 September when it held 35.14%.  On Sunday the 26 October, it announced:

Due to the dramatic distortions on the financial markets Porsche Automobil Holding SE, Stuttgart, has decided over the weekend to disclose its holdings in shares and hedging positions related to the takeover of Volkswagen AG, Wolfsburg. At the end of last week Porsche SE held 42.6 per cent of the Volkswagen ordinary shares and in addition 31.5 per cent in so called cash settled options relating to Volkswagen ordinary shares to hedge against price risks, representing a total of 74.1 per cent.

Then that sinking feeling: Porsche holds 74.1%, Lower Saxony 20%, leaving ~6% of ordinary shares in the market to buy. Yet an estimated 12% of the ord shares were short sold. It wasn't possible for all short-sellers to buy back shares and close their positions.
VW touched $999/share on the 28 October,  before finally coming back (ostensibly from the moon) to earth, belatedly helped by Porsche providing 5% to short-sellers (despite blaming the shorts for the extreme price movements).

Porsche subsequently cleared 50% in VW's ordinary shares, but not only lacked the funding to take its stake all the way to 75% - via the options - it had also borrowed heavily to build that 50% stake in VW, to the point the iconic car brand had to stave off possible bankruptcy.
Short-sellers lost around US$20bn which has largely fallen on deaf ears in the courts. Porsche's CEO Wendelin Wiedeking was booted out. And Ferdinand Piëch, Ferdinand Porsche's grandson, former CEO, then chairman of VW, was sitting pretty as he and family held 50% of the voting rights in Porsche SE. 
The ords moved into negative territory following the carnage, then roughly hugged parity for a few years. The ord premium is on the run again. Time to get short?


Germany

Volkswagen AG manufactures and sells vehicles. The Company offers economy and luxury automobiles, sports cars, trucks, and commercial vehicles. Volkswagen serves customers worldwide.

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Volkswagen (VOW GR)

Liquid Universe of European Ordinary and Preferred Shares: December Report

Spreads have generally tightened across our liquid universe, with some notorious exceptions such as BMW, Sixt and Volkswagen. Roche seems the most...

Jesus Rodriguez Aguilar

LG Energy Solution IPO Initiation: Amp My Ride

LGES is pre-marketing an IPO to raise up to $10.8 bn, potentially Korea’s largest-ever listing. It has attractive fundamentals with a strong...

Arun George

Global Autos Hit Record Underweight: Tesla Piles on the Pain

Global Autos underweight hits a record high among active Global Funds. Tesla Motors (TSLA US) the driving force behind the move, with only 12.7%...

Steven Holden

Liquid Universe of European Ordinary and Preferred Shares: November Report

Spreads have generally tightened across our liquid universe, with some notorious exceptions such as Volkswagen and Grifols.

Jesus Rodriguez Aguilar

Volkswagen's Ords Are Acting Up - Again

Why the bifurcation? I see no apparent reason. And without the benefit of understanding why this recent move has occurred, I'd be reluctant to set...

David Blennerhassett

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