In today’s briefing:
- Socionext Lock-Up – Up 2.67x Since IPO. US$930m Worth of Shares to Be Unlocked
- Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
- Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
- HDFC/HDFC Bank Merger: Foreigners Sell HDFC; LTIM in NIFTY; JSP in NEXT50
- Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
- And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
- SSE50 Index Rebalance Preview: Potential Adds Powering Higher
- Socionext (6526 JP): US$1.9bn Secondary Placement
- Tryt IPO – Valuation Seems Digestible at the Bottom End, but the Firm Still Needs to Get a Lot Right
- Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP
Socionext Lock-Up – Up 2.67x Since IPO. US$930m Worth of Shares to Be Unlocked
- Socionext (6526 JP) was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup will expire on 9th Apr 2023.
- Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation in 2015.
- Coming up for six-month lockup expiry are the Development Bank of Japan, Fujitsu and Panasonic, the trio had each trimmed their respective stakes in the IPO.
Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
- We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
- The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
- We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.
Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
- Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
- Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock.
- I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.
HDFC/HDFC Bank Merger: Foreigners Sell HDFC; LTIM in NIFTY; JSP in NEXT50
- HDFC Limited (HDFC IN) will stop trading at the close on 12 July and will be deleted from all indices at the close on that day.
- As expected, LTIMindtree (LTIM IN) will be added to the NIFTY Index while Jindal Steel & Power (JSP IN) will be added to the NSE Nifty Next 50 Index.
- Importantly, HDFC Limited (HDFC IN)‘s foreign shareholding has dropped over the quarter ended 30 June and that has index implications for future passive flows to HDFC Bank (HDFCB IN).
Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
- Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
- Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
- Every now and then, you get a tender offer proposal which is truly offensive. This is one.
- Yes, existing ICE-related autoparts makers are under the cosh as they face down obsolesence induced by competition from EVs. Fuel tank makers like Yachiyo are at risk.
- But this bid started at <0.3x book, and ended at <0.5x book, despite significant net financial assets and lots of unrecognised DTAs.
SSE50 Index Rebalance Preview: Potential Adds Powering Higher
- Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
- We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
- The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.
Socionext (6526 JP): US$1.9bn Secondary Placement
- Socionext (6526 JP) announced a pure secondary offering of 12.6 million or 37.50% of outstanding shares. At the last close, the placement is worth JPY277 billion (US$1.9 billion)
- The selling shareholders’ primary motivation for exiting their shareholding is to capitalise on the extraordinary share price. Socionext shares are up 6x from the IPO price of JPY3,650 per share.
- We think looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 11 to 13 July (likely 11 July).
Tryt IPO – Valuation Seems Digestible at the Bottom End, but the Firm Still Needs to Get a Lot Right
- Tryt Inc (9164 JP) is looking to raise up to US$360m in its Japan IPO.
- Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
- In this note, we will revisit our earnings assumptions and share our thoughts on valuation at the final price range.
Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP
- It is highly probable that SP trading will increase after July 31st, as this will provide a more conducive environment for the seamless rollover of large positions.
- Considering the actual impact on the market, we may have to pay more attention to the potential surge in trading volume for single-stock futures SP.
- We see a rise in aggressive position setups in event trading, including rights offerings. This may lead to a more substantial price impact by increasing the intensity of such trading.
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