In today’s briefing:
- Finding Unusual Arbitrage Angles in Kumyang’s Effectively Pre-Announced Capital Increase
- Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders
- Potential Price Decline Amplification from NPS’s Appraisal Rights Exercise Against NCSoft
- End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024
Finding Unusual Arbitrage Angles in Kumyang’s Effectively Pre-Announced Capital Increase
- The arbitrage is clear: it’s the difference between stock rights/subscription costs and short hedge price. Kumyang’s high market interest and volatility amplify this, suggesting unusual trading angles.
- Kumyang’s futures also show extreme volatility, likely causing excessive backwardation around the ex-rights date and stock rights window, affecting futures-based short hedge positions.
- This opens up the possibility that, depending on entry points, our futures-based short hedge position might temporarily enter an unusual profitable zone relative to the stock rights and subscription costs.
Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders
- In the past week, there were numerous local news accounts about a rights offering of nearly 800 billion won by Kum Yang. This has not been confirmed by the company.
- Although Kum Yang has not committed to a rights offering, there is a high probability of such capital raise in 4Q24 which is likely to dilute existing shareholders.
- Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as possible.
Potential Price Decline Amplification from NPS’s Appraisal Rights Exercise Against NCSoft
- During NCSoft’s exercise period starting August 14, the spread was tight, with NPS likely to exercise rights if it widens above 5% in the final days.
- NPS is unlikely to exercise its full 6.3% stake, but may sell 2% if the stock price drops below ₩180,000, widening the spread over 5%.
- This may increase NCSoft’s division costs and overhang risk, potentially amplifying stock price decline. Monitoring NCSoft’s stock early next week is crucial.
End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024
- We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2024, among which 3 are in KOSPI and 46 are in KOSDAQ.
- These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
- The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in September include LS Materials, CIS, and Kyobo Securities.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
