Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Kakao Bank MSCI FIF Confirmed at 11%: Some Ideas of How MSCI Concluded It

MSCI's Fairly Arbitrary Float Judgment on Kakao Bank, & Potentially Krafton as Well?

Kakao Bank: Passive Supply/Demand Situation & Profit Realization Timing

Krafton IPO: Allocations & Lock Ups Announced - KOSPI200/FTSE Easy; MSCI Touch & Go

Krafton: Only 20% of Employee Stock Ownership Association Apply for the IPO Shares

Krafton Bookbuilding: Subscription/Lockup Data & Resulting Implications

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Capital Markets

Final AllocationsIt seems that Krafton's institutional allocation results can only be described with the word "exquisite".Krafton and Mirae Asset made an extreme decision to completely ignore the number of subscription applications. As a result, they allocated almost 100% only to the institutions with long-term holding tendencies.In particular, 60% of the total institutional volume was allocated to foreign institutions, regardless of whether they are locked up or not. And Mirae Asset has stated several times that they are mostly long-only funds. Among them, institutions whose names have been leaked to the market by Mirae Asset include Singapore's GIC and BlackRock.








By investor type
Holding tendencies
Applications
Allocated, % of the offering


Local publicly raised funds
Long-term
38.52%
19.03%


Local brokerages/investment advisories
Short-term
2.45%
0.53%


Local pensions, funds managing proprietary assets, banks, and insurance companies

Long-term
(Mostly, local pensions)

20.99%
18.07%


Local - Other (mostly discretionary investment companies - local hedge funds))
Mainly, short-term
20.30%
2.31%


Foreign (foreign IPO funds &amp; hedge funds)

Long-term
(Mostly long-only funds)

5.40%
60.06%


Foreign - Other (mostly local hot money)
Short-term
12.33%
0.00%

Source: DART

The lockup result is even more dazzling. Most domestic institutions have tied them up with lockup. It is also close to 70% over 3 months.
Foreign organizations do not conventionally apply for lockup for various reasons. Therefore, although the proportion of lock-up is only 20% of the allocated quantity, it is safe to consider that most of the quantity that is not actually locked up is subject to long-term holding.
On the other hand, institutional investors in the Local - Others and Foreign - Other categories, which can be seen as the most severe short-term hot money, received almost no allocation.
As a result, the total amount allocated to institutions is 11.67% of the post-IPO SO, of which 6.43% is not locked up. However, since it can be inferred that most of this 6.43% is owned by overseas long-only funds, all of this 11.67% should be considered unavailable in the market right away.














Lock-up, by orders
1. Local PO
2. Local Br/IA
3. Local pension, etc.
4. Local - Other
5. Foreign
6. Foreign - Other
Total
% of post-IPO SO


6 months
3.36%
0.00%
0.00%
0.34%
0.00%
0.00%
3.70%
0.43%


3 months
7.29%
0.00%
15.79%
0.62%
0.04%
0.00%
23.74%
2.77%


1 month
3.65%
0.00%
0.72%
0.59%
11.98%
0.00%
16.94%
1.98%


15 days
0.39%
0.00%
0.00%
0.14%
0.00%
0.00%
0.53%
0.06%


No lockup
4.34%
0.53%
1.57%
0.62%
48.03%
0.00%
55.09%
6.43%


Total
19.03%
0.53%
18.07%
2.31%
60.06%
0.00%
100.00%
11.67%

Source: DART

Overall, as expected, the ESOP recorded a large under-subscription. The ESOP took only one-fifth of the allocated quantity, and the remaining was additionally allocated to institutions and retailers in a 2:1 ratio. By diverting a significant portion of the ESOP volume to institutions, the index float was increased while the real-world float was left untouched.








Allocation by type
Allocated, % of the offering
Final, % of the offering
Final, % of post-IPO SO


Institutional
55.00%
65.90%
11.67%


1. Local publicly raised funds
-
12.54%
2.22%


2. Local Br/IA
-
0.35%
0.06%


3. Local pension, etc.
-
11.91%
2.11%


4. Local - Other
-
1.52%
0.27%


5. Foreign
-
39.58%
7.01%


6. Foreign - Other
-
0.00%
0.00%


Retail
25.00%
30.00%
5.31%


ESOP
20.00%
4.10%
0.72%


Total
100.00%
100.00%
17.70%

Source: DART



A Mismatch Between Krafton Immediate Float & Passive Inflow Quantity