In today’s briefing:
- EOFlow’s Suspension Is Not (All) Negative
- EOFLOW/Medtronic Tender: On Life Support
- Eoflow: Temporary Trading Suspension
- POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer
- A Noteworthy ETF Flow Trading Opportunity Targeting the Pair Comprising Kia & Posco Future M
- Kiwoom Securities: Announces Material Improvement in Shareholder Return Policies
EOFlow’s Suspension Is Not (All) Negative
- On the 6th of October, a US district court judge entered a preliminary injunction (PI) against EOFlow (294090 KS), pending a trial. This development should have been expected.
- Less expected was the suspension of EOFlow shares today, and the cessation of sales globally.
- The latter measure appears extreme, noting the PI addresses only sales in the US, which EOFlow is not permitted anyway, without FDA approval. There’s clearly more than meets the eye.
EOFLOW/Medtronic Tender: On Life Support
- In reaction to the preliminary injunction, Eoflow (294090 KS) shares were suspended as it is reviewing whether it is subject to a substantive review for KOSDAQ listing eligibility.
- Medtronic Plc (MDT US) is in an unprecedented situation of potentially acquiring a company whose shares are suspended, has a preliminary injunction against it and exposure to possible liabilities.
- Medtronic could have prevented this development by reaffirming its commitment to the deal. The transaction is on increasingly shaky grounds, which is reflected in the 38.2% gross spread.
Eoflow: Temporary Trading Suspension
- On 10 October, the Korea Exchange announced a temporary suspension of trading of Eoflow (294090 KS) shares starting 11 October.
- Eoflow decided at its board of directors meeting the previous day (10th) to suspend production and sales of Eoflow patches until the outcome of the lawsuit is resolved.
- In this insight, we provide various scenario analysis including the worst case, best case, and in-between cases of the Eoflow M&A tender offer process.
POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer
- Posco DX (022100 KS) has applied to the KRX for a transfer from the KOSDAQ market to the KOSPI market.
- Based on history, the approval for the transfer and the listing change could take place in the next two months.
- That means a deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) and inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX). But the timeline is important.
A Noteworthy ETF Flow Trading Opportunity Targeting the Pair Comprising Kia & Posco Future M
- Kia is set to make a comeback, while the exclusion of Posco Future M is on the horizon.
- The screening date is set for November 30th, and the effective date is December 18th, which means the ETF rebalancing will take place on December 15th.
- The exposure period to the market is relatively short, so it’s essential to acknowledge the limited accumulation of learning effects. This suggests we can anticipate a notably substantial price impact.
Kiwoom Securities: Announces Material Improvement in Shareholder Return Policies
- On 10 October, Kiwoom Securities announced shareholder friendly policies. This could lead to Kiwoom Securities outperforming other major Korean securities companies in the next several months.
- First, the company will return more than 30% of its net profit to the shareholders in the next three years through dividends and share buybacks/cancellations of treasury shares.
- In addition, Kiwoom Securities plans to cancel all 1.4 million treasury shares it currently holds, representing 5.3% of outstanding shares.
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