In today’s briefing:
- JSR (4185) – Possible Trouble in Arb Land as SUNY/CNSE Files Suit Against JSR Sub Inpria
- JSR Corporation (4185 JP): An Unwelcome US Lawsuit as Tender Start Looms
- Japan – Increasing Shorts on Some Interesting** Stocks
- Aozora Bank (8304 JP) – Two Bets Too Far
JSR (4185) – Possible Trouble in Arb Land as SUNY/CNSE Files Suit Against JSR Sub Inpria
- JSR Corp (4185 JP) announced 2 February on its website that the Research Foundation for the State University of New York (“RF SUNY”) filed suit against JSR subsidiary Inpria 25 January.
- JSR claims no wrongdoing. A court order from the US District Court for the Northern District of New York denied RF SUNY’s request for a hearing by 5 February.
- This may put a short-term damper on sentiment in the name, and I expect the JICC people have been working on this for a week.
JSR Corporation (4185 JP): An Unwelcome US Lawsuit as Tender Start Looms
- The Research Foundation of the State University of New York (SUNY RF) has filed a patent infringement lawsuit against JSR Corp (4185 JP) and its subsidiary, Inpria.
- SUNY RF claims the “planned tender offer will irreparably harm SUNY RF absent preliminary relief” and filed a motion for a preliminary injunction to stop JSR licensing patents to JIC.
- JSR has yet to file a response, making it hard to judge the lawsuit’s merits. The best case is the PI is not granted, delaying the tender by a month.
Japan – Increasing Shorts on Some Interesting** Stocks
- There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.
- The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
- BayCurrent Consulting (6532 JP) is a dark horse for inclusion in the Nikkei 225 (NKY INDEX) in March and this deletion could take the stock lower before the Nikkei 225 announcement.
Aozora Bank (8304 JP) – Two Bets Too Far
- 3QFY23 results reveal losses related to Aozora’s US CRE exposure and securities portfolio; management forecasts a FY23 loss and a 50% cut in the previously forecast FY2023 dividend
- US CRE exposure is 6.6% of total loans and Aozora’s US CRE deterioration propelled the NPL ratio to 2.87% up 162bps QoQ, the worst NPL ratio of the peer group
- The securities portfolio hits are in US MBS and US bond ETFs; SMFG and Mizuho have large relative FX bond exposures, but they have less duration risk
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