In today’s briefing:
- SM Entertainment: Kakao’s Tender Offer Proration Analysis
- SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening
SM Entertainment: Kakao’s Tender Offer Proration Analysis
- In this insight, we provide a proration analysis of the S.M.Entertainment Co (041510 KS) tender offer by Kakao Corp (035720 KS).
- Our base case assumes 71.4% of outstanding shares will participate in the tender offer, including HYBE, NPS, KB Asset Mgmt, Com2Us, and 70% of the remaining local and overseas investors.
- There is a very high probability of a successful tender offer of SM Entertainment shares by Kakao. Post end of tender offer, its share price could fall about 5-10%, however.
SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening
- The target volume is 47.6% of the nominally estimated tendering pool size. It may go up due to retail investors’ typically low participation in tendering.
- Other factors MAY OFFSET this. Most notable is the tendering possibility of HYBE (18.45%) and Lee Soo-man (4.96%). Combining these, the allocation rate will likely be between 50% and 60%.
- Using this 50-60% band as a reference point, we should assess the risk of mismatching between the degree of post-tendering price correction and our loss buffer range for non-tendered shares.
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