In today’s briefing:
- Japan – Increase in Shorts on Some Interesting* Stocks
- EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
- TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
- S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)
- Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say
- Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
- Merger Arb Mondays (16 Oct) – NWS, Haitong Intl, Eoflow, Liontown, Origin Energy, Estia, Pact, JSR
Japan – Increase in Shorts on Some Interesting* Stocks
- CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
- The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
- Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.
EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
- Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
- Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
- Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.
TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
- In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one.
- They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
- Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.
S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)
- Light & Wonder (LNW AU) will replace United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
- Invocare Ltd (IVC AU) is expected to stop trading after the close on 3 November and Boss Resources (BOE AU) is best placed to be the replacement.
- There are stocks that are close on the heels of Boss Resources (BOE AU) and will compete for a place. Two of those could be added at the December rebalance.
Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say
- Post-Close Friday it was announced that Light & Wonder (LNW AU) Chess Depositary Interests would replace United Malt Group Ltd (UMG AU) at the close on 17 October.
- This was announced before US markets opened. Light & Wonder (LNW US) shares popped 5.65%, closing 5.8% through the Aussie line.
- This is a possibly deceptive index add. I’d be quite careful.
Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
- First, we can take on some risk and build up a short position using SSFs from now, aiming for an aggressively low price (likely Day 1) during the rights trading.
- If this approach seems somewhat risky, the second is to wait until the rights trading and, although accepting some sacrifice in the spread, build positions relatively risk-free.
- We can also actively build up a long position in the significantly backwardated SSFs from now and, instead, set up an aggressive short on the underlying shares.
Merger Arb Mondays (16 Oct) – NWS, Haitong Intl, Eoflow, Liontown, Origin Energy, Estia, Pact, JSR
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Haitong International Securities Group (665 HK), Orecorp Ltd (ORR AU), Liontown Resources (LTR AU).
- Owest spreads Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), Pact Group Holdings (PGH AU), Origin Energy (ORG AU), T&K Toka Co Ltd (4636 JP), Healthway Medical Corp (HMED SP).
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