In today’s briefing:
- Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
- FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Capping Changes in September
- Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- Looking at Canon Buyback Dynamics History – Patterns Vs Peers Gives Execution Hints
- Kakao Games: Announces A Rights Offering Worth 197 Billion Won
- True/DTAC: Merger Support Increasingly Tenuous
- XPER: Ready for a Split
- ARLO: Capturing Paid Subscriber Growth
Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
- Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true.
- The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early.
- This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Capping Changes in September
- We do not expect any deletions from the FTSE TWSE Taiwan Dividend+ Index in September, but there will be a lot of passive flow due to capping changes.
- Based on the closing prices from 9 August, we estimate one-way turnover of 11.2% at the September rebalance resulting in a one-way trade of TWD 15,754m (US$525m).
- Most stocks with expected passive inflows are trading near their recent lows (leading to higher dividend yield), while most stocks with expected passive outflows have rallied recently (lower dividend yields).
Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
- We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
- But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically
Looking at Canon Buyback Dynamics History – Patterns Vs Peers Gives Execution Hints
- Canon Inc (7751 JP) has just started its 17th buyback in 15 years. Like the 16 before, this one is for ¥50bn.
- The patterns/dynamics of the canon buybacks in the past are remarkable when compared to buybacks of other companies.
- There are outperformance and under-performance patterns vs Peers, and it is worth taking note if you have a position to trade.
Kakao Games: Announces A Rights Offering Worth 197 Billion Won
- Kakao Games Corp (293490 KS) announced today a rights offering worth 197 billion won, representing 4.4% of its market cap.
- Lionheart Studio’s founder and CEO Kim Jae-Young is expected to purchase 3.1 million shares of the rights offering (177 billion won), representing 90% of the total rights offering shares.
- The issue with Kakao Games and Lionheart Studio remains the fact that many investors would rather invest in Lionheart when it completes its IPO, rather than indirectly through Kakao Games.
True/DTAC: Merger Support Increasingly Tenuous
- Reportedly, the board of the National Broadcasting and Telecommunications Commission (NBTC), Thailand’s telco regulator, has called for a more detailed analysis of the deal’s impact on competition, consumers and industry.
- This follows recent calls by Thailand’s opposition Move Forward party urging the NBTC to block Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB)‘s merger.
- Both DTAC and True are trading tight to terms – especially True. Time to take down borrow.
XPER: Ready for a Split
- XPER is in the final stages of separating its IP business from its product business.
- The Company reported second quarter results in line with our updated estimates after announcing the purchase of Vewd Software and an IP license agreement
- XPER’s multiple revenue streams gives the Company the ability to grow free cash flow even though one segment could be lagging
ARLO: Capturing Paid Subscriber Growth
- ARLO continues to demonstrate the strength of its paid subscription service by reporting its third straight quarter of non-GAAP net income.
- ARLO’s ability to grow the number of paid subscribers each quarter has pushed the business to achieve annual recurring revenue (“ARR”) of $116.6 million
- ARLO added 206 thousand paid subscribers in the second quarter. This was the second straight quarter where the number of net additions was over 200 thousand for the quarter
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