In today’s briefing:
- Japan – Increase in Shorts on Some Interesting*** Stocks
- Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
- Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”
- Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap
- StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS
- Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
- Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback
- SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
- Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
- Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected
Japan – Increase in Shorts on Some Interesting*** Stocks
- Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
- The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
- There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.
Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
- There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
- Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
- There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.
Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”
- Yesterday, Reuters reported that multiple Toyota Group companies would sell ~10% of Denso Corp (6902 JP) worth ¥700bn in a secondary share sale by year-end.
- The sellers would be Toyota, selling down to just over 20%, Toyota Industries (6201) (selling down a bit more than half, and Aisin Seiki (7259 JP) selling its 2% stake.
- Denso would buy back shares. This whole thing is both interesting and complicated so I discuss the interesting complications below. It looks bigger than it probably is.
Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap
- 15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
- A holistic view of the three different documents here suggests, indeed, “It was a trap”.
- This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.
StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS
- The Toyota Group of companies are proposing to reduce their holdings in Denso (6902 JP) by selling about 10% by year-end, in a share sale worth ~$4.7bn.
- Preceding my comments on Toyota Industries (6201 JP) / Toyota Motor (7203 JP) – and Las Vegas Sands (LVS US) – are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
- KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
- The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
- We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.
Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback
- Denso Corp (6902 JP) announced a secondary offering of up to 294.8 billion shares (including overallotment) and a buyback (maximum shares of 125 million or maximum value of JPY200 billion).
- Denso also announced a cross-holding reduction policy. In an unspecified timeframe, it will sell part of its holdings in Toyota Industries (6201 JP) and Aisin (7259 JP).
- Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 13 and 18 December (likely 13 December).
SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
- SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company.
- SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
- In addition, SK Square announced the merger of TVing and Wavve OTT services.
Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
- There should be liquidity events on Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp tomorrow.
- On average, the stocks have underperformed the Nikkei 225 Index over the last 2-3 months but there has been near-term outperformance.
- There has been a big increase in shorts on the stocks over the last couple of months and positioning varies across stocks.
Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected
- Following yesterday’s news release by Reuters that Toyota Motor (7203 JP) could sell up to 10% of Denso Corp (6902 JP), the deal was officially launched today.
- Toyota is the company’s largest shareholder and its largest customer.
- We have covered the deal background in our earlier note, Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn. In this note, we talk about the final terms.
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