In today’s briefing:
- 7&I (3382) Update – Couche-Tard Responds
- Rio Tinto (RIO AU/LN): Shareholders To Vote On Merits Of Unification
- JX Advanced Metals (5016 JP) IPO: Big Retail Allocation Means No Fast Entry
- IndusInd Bank (IIB IN): Stock Crashes on Derivatives Losses; Index Selling Next
- Properly Interpreting Korea’s Stock Borrow Data for Short Selling
- Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?
- Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- Changyou (CYOU US): Short-Form Merger Dissent Now (Definitely) Permitted
- CSI500 Index Rebalance Preview: 50 Changes; 10% Turnover; US$3.6bn Round-Trip Trade
- Is Homeplus Debacle a Key Negative Tipping Point for MBK?
7&I (3382) Update – Couche-Tard Responds
- On 10 March, Alimentation Couche-Tard (ATD CN) issued a release “UPDATE ON PROPOSAL FOR A COMBINATION WITH SEVEN & i“.
- They felt obliged to be transparent in the wake of the 7&i Letter To Shareholders released yesterday. The content/nuance of the two letters differ significantly.
- Two parties competing to get a truth which cannot be both could be problematic. We are still many months away from any kind of ACT/7-11 deal.
Rio Tinto (RIO AU/LN): Shareholders To Vote On Merits Of Unification
- Palliser Capital, which reportedly holds ~$300mn in Rio Tinto Ltd (RIO AU/LN) shares across its dual-head structure, has campaigned for near-on a year to unify the primary listing in Australia.
- Palliser’s reasonings (and others) to unify make sense, such as access to stock-based mergers and eliminating franking wastage. A recent independent assessment from Grant Thornton is also supportive of unification.
- Shareholders will vote on the resolution on 3rd April for UK-listed shares and 1st May for Australian-listed shares. The UK line holds the key to the vote outcome.
JX Advanced Metals (5016 JP) IPO: Big Retail Allocation Means No Fast Entry
- JX Advanced Metals (5016 JP) has priced its IPO at ¥820/share, at the top end of the IPO range but lower than the initial indication of ¥862/share.
- With the bulk of the domestic offering going to retail investors, there is no chance of Fast Entry for the stock in global indices.
- TOPIX INDEX inclusion will take place at the close on 28 April, while inclusion in major global indices is likely to take place in August and September.
IndusInd Bank (IIB IN): Stock Crashes on Derivatives Losses; Index Selling Next
- The Indusind Bank (IIB IN) stock was down 27% yesterday following the announcement of Derivatives Portfolio losses that have wiped out 2.35% of equity.
- Foreign investors were big sellers in the last 3 months of 2024. That led to increased foreign room, leading to an index upweight in February and index inclusion in March.
- The drop in market cap and free float market cap will see Indusind Bank (IIB IN) deleted from the S&P BSE SENSEX Index in June and the NIFTY Index in September.
Properly Interpreting Korea’s Stock Borrow Data for Short Selling
- Local instos borrow from brokers or peers, KSD collects and cleans the data, then KOFIA reports stock borrow balances daily with a two-day lag.
- Offshore borrows via EquiLend or PB deals don’t show up—KSD reporting only covers local institution-to-institution stock loans.
- Assume 60% of reported borrow balance is real shortable ammo—adjusting for this helps filter out noise in short positioning.
Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?
- The MBO for Proto Corp (4298 JP) where the founder/chair is buying out from minorities is being done at the wrong price. His reasons are good, but not for minorities.
- One large foreign shareholder – the second largest shareholder of the firm – has offered substantial pushback in the form of a letter asking for discussions. That went nowhere.
- So now they have come out harder. The solution here is a really big bump or a broken deal if investors keep the share price above the TOB price.
Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- At the upcoming AGM, Rio Tinto Ltd and Rio Tinto PLC shareholders will vote on the company commencing a review on the benefits vs costs of Unification.
- Palliser Capital has been pushing for Unification while the Rio Tinto Board has recommended that shareholders vote against Resolution 21/24 citing tax costs among other reasons.
- If the Unification completes, S&P/ASX trackers will need to buy Rio Tinto Ltd (RIO AU) while UKX Index (UKX INDEX) trackers will sell Rio Tinto PLC (RIO LN). Net positive.
Changyou (CYOU US): Short-Form Merger Dissent Now (Definitely) Permitted
- In a long-form merger for Cayman incorporated companies, dissenters can petition the Grand Court for determination of fair value. For short form merges, that avenue of dissent was not available.
- But on the 28 January 2021, the Grand Court of the Cayman Islands concluded that shareholders of companies that undertake a ‘short-form’ merger were entitled to dissent.
- Changyou.com (CYOU US) appealed this decision in the Court of Appeal, and was dismissed. Then appealed to the Privy Council. In a judgement handed down yesterday, this was also dismissed.
CSI500 Index Rebalance Preview: 50 Changes; 10% Turnover; US$3.6bn Round-Trip Trade
- With 85% of the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index at the close on 13 June.
- We estimate a one-way turnover of 10% at the rebalance resulting in a round-trip trade of CNY26.4bn (US$3.6bn). The Information Technology gains at the expense of Healthcare and Consumer Staples.
- The forecast adds have outperformed the forecast deletes and the CSI Smallcap500 Index over the last 6 months. The best part is that the volatility of the trade is very low.
Is Homeplus Debacle a Key Negative Tipping Point for MBK?
- In this insight, we discuss how the Homeplus debacle is causing a major negative sentiment on MBK Partners from both the Korean government and the media.
- This negative sentiment has grown so much that it could have a legitimate negative impact in the upcoming proxy vote for the control of Korea Zinc.
- The Korean government has targeted MBK for tax probe. Plus, a coalition of securities firms is expected to file a lawsuit against Homeplus and MBK.
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