1. JSR (4185) – Time To Fight The FUD
- Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come.
- FUD and Flows would widen the spread. And they did.
- Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.
2. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade
- Using data from the close on 20 November, there could be 6 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- There will also be capping and funding flows that will lead to a one-way turnover of 17.8% and a one-way trade of US$1.37bn.
- There are 16 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.
3. Understanding Extreme SSF Spreads in Korea & Trading Approaches
- Futures backwardation resulting from the short selling ban will persist. Also, the contraction of market making will lead to more widespread and frequent occurrences of extreme spreads.
- The straightforward sell arbitrage (reverse cash and carry) is no longer viable. We must pay attention to the emergence of new price and trading patterns driven by these market conditions.
- One potential pattern is the possibility of spot buying centered around those that exhibited extreme spreads at expiration. This has already been observed to some extent in this month’s expiration.
4. EOFlow (Further) Tests Investor Patience
- Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
- Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
- Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.
5. What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?
- The day the basis spread disappears is this Friday, the 24th of November. This mirrors a comparable pattern observed during Korean Air’s rights offering in 2020.
- If the spot price does not fall below the futures price of our entry until this Friday, we could potentially be in a profitable range.
- There has been a notable pattern where the spread continues to exist until just before the moment when new share selling becomes feasible.
6. HSCI Index Rebalance: Keep (3650 HK) & TUHU Car (9690 HK) Added
- Keep Inc (3650 HK) and Tuhu Car (9690 HK) will be added to the Hang Seng Composite Index (HSCI) after the close of trading on 1 December.
- Keep (3650 HK) will be added to Southbound Stock Connect from the open on 4 December while Tuhu Car (9690 HK) will only be added to Stock Connect in April.
- There are lock-up expiries on both stocks, prior to or after inclusion in Stock Connect, and trading strategies will need to take that into account.
7. Origin Energy (ORG AU): State of Play
- The Origin Energy (ORG AU) scheme vote is on 23 November. Brookfield/EIG’s best and final offer is A$6.59 and US$1.86 per share, currently worth A$9.45.
- With AusSuper reportedly increasing its stake past 17% on Friday, the scheme vote remains too close to call. Brookfield/EIG will need a large YES vote turnout for a successful vote.
- If the scheme is voted down, there are mainly three Plan Bs – Brookfield/EIG’s alternate transaction structure, Board-initiated strategic review or maintaining the status quo.
8. Tata Technologies IPO: Offering Details & Index Inclusion
- Existing Tata Technologies (TATATECH IN) shareholders are looking to sell 60.85m shares and raise between INR 28.9-30.4bn (US$347-365m) giving the company a market cap of between US$2.31-2.44bn.
- Tata Technologies (TATATECH IN) will have a float of around 10% at the time of listing and that will increase close to 30% after the pre-IPO lock-up ends.
- Tata Technologies (TATATECH IN) could be added to global indices in May and June, but inclusion in local indices with meaningful tracking assets will take longer.
9. Daito Trust (1878) Doing a ToSTNeT Buyback Which Is NOT a ToSTNeT Buyback… Unless It Is.
- Back on 30 October, Daito Trust Construct (1878 JP) announced a large earnings, a new Shareholder Return policy, a higher payout this year, and a big buyback.
- It said the buyback period would start two days later, but they did not specify the method (Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year
- Today they announced a ToSTNeT-3 purchase for “the whole size”, which is accompanied by a “Japan-style ASR.” Know your details.
10. S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement
- There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
- Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
- Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.
Weekly Top Ten Event-Driven and Index Rebalance
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