In today’s briefing:
- Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
- Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
- Socionext (6526 JP): US$1.9bn Secondary Placement
- And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
- Delisting of 5 Korean Preferred Stocks on 17 July
- Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade
- Rakuten Securities IPO: Promising Business with Valuation Caveats
- SENSEX Ad Hoc Rebalance: JSW Steel Replaces HDFC
- TRYT IPO: Revised IPO Price Range Remains Unattractive
- Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store
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.
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.
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).
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.
Delisting of 5 Korean Preferred Stocks on 17 July
- The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
- These five stocks including Samsung Heavy Industries Pref, SK Networks Pref, DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.
- Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today.
Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade
- In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
- The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.
- Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September.
Rakuten Securities IPO: Promising Business with Valuation Caveats
- Yesterday, Rakuten Group (4755 JP) announced that its consolidated subsidiary, Rakuten Securities, has applied for a listing on the Tokyo Stock Exchange.
- Rakuten Securities has long-term growth potential through leveraging Rakuten’s ecosystem for steady securities account growth and exploring cross-selling opportunities for related services.
- While the business seems promising, there may be concerns regarding its valuation, given its previous high trailing PE of 43.0x.
SENSEX Ad Hoc Rebalance: JSW Steel Replaces HDFC
- Following HDFC Limited (HDFC IN)‘s delisting, JSW Steel Ltd (JSTL IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) at the close on 12 July.
- The change was largely expected, but passive trackers need to buy over 5 days of ADV and nearly 12 days of delivery volume of JSW Steel Ltd (JSTL IN) .
- The HDFC Limited (HDFC IN) delisting could help Wipro Ltd (WPRO IN) in avoiding deletion from the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) in December.
TRYT IPO: Revised IPO Price Range Remains Unattractive
- Tryt Inc (9164 JP) has disclosed a revised IPO price range of JPY1,100-1,300 per share, which is -32% to -20% below the IPO reference price of JPY1,620 per share.
- We previously discussed the IPO in TRYT IPO: The Bull Case, TRYT IPO: The Bear Case and TRYT IPO: Valuation Insights.
- Our analysis suggests that Tryt remains unattractively valued at the revised IPO price range. Also, market sentiment on the sector has weakened. We would pass on the IPO.
Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store
- Hyundai G.F. Holdings will conduct a tender offer to Hyundai Green Food and Hyundai Dept Store shareholders. The tendering period is August 11-September 1.
- The target volume is 10,125,700 (Hyundai Green Food) and 4,669,556 (Hyundai Dept Store), corresponding to 29.89% and 19.95% of the outstanding shares, respectively.
- We should approach this event trading with caution, taking into account the risk of an unhedged setup while monitoring the potential widening of the spread opening during the tendering period.
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