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

Doosan Infracore Rebalancing Trading on June 28 & Outright Short-Selling Opportunity

How Would We Capitalize on a Massive Discount Present on Doosan Infracore Business Unit?

Yes, We Can Short Doosan Infracore for Arb Setup Even Now with Offering Pre-Announcement

Clepsydra Capital

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

Equity Capital Markets

HD Hyundai Infracore / Equity Capital Markets

<h2>Overview</h2><p>This is again an offering to the stockholders with forfeited shares going to a public offering. A total of 115 million new shares are issued, and the tentative issuance price is set at ₩6,950. So, the total issuance size is ₩0.8T.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Overview"}'>Overview</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Target"}'>Target</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"A public offering of forfeited shares after offering to stockholders"}'>A public offering of forfeited shares after offering to stockholders</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Transferability"}'>Transferability</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Renounceable"}'>Renounceable</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Volume"}'><strong>Offering volume</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":115107913}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'><strong>115,107,913</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary price"}'><strong>Preliminary price</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":6950}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}'><strong>₩6,950</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary value"}'><strong>Preliminary value</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":799999995350}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[0]*R[-1]C[0]"><strong>₩799,999,995,350</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Oversubscription privilege"}'>Oversubscription privilege</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Banker"}'>Banker</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"KB, NH, KIS, Mirae Asset, Hana, Samsung, DB, Daishin, &amp; Hi"}'>KB, NH, KIS, Mirae Asset, Hana, Samsung, DB, Daishin, &amp; Hi</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Underwriting type"}'>- Underwriting type</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Standby"}'>Standby</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><div class="content-highlight"><p>The tentative issuance price of ₩6,950 was calculated based on this formula: Average [1M VWAP, 1W VWAP, 1D Close], as of September 9, 2021.</p></div><h2>Allocation</h2><p>Currently, the number of issued common stock is 79.5 million. So the capital increase rate is a whopping 144.75%, and the dilution per share is 59.14%. Since 20% is allocated to the ESOP, the allocation ratio to stockholders is <strong>1.1589273</strong>.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Allocation"}'>Allocation</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Offer volume"}'><strong>Offering volume</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":115107913}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]"><strong>115,107,913</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase"}'>Capital increase</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.447498858082393}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-4]C[0]/R[-7]C[0]">144.75%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Dilution"}'>Dilution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5914196255096533}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-5]C[0]/(R[-8]C[0]+R[-5]C[0])">59.14%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total shares after rights offer"}'>Total shares after rights offer</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":194629850}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[1]C[0]+R[2]C[0]">194,629,850</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"ESOP allocation"}'>ESOP allocation</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":23021582}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>23,021,582</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'>- %</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.19999999478749997}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-17]C[0]">20.00%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder allocation"}'><strong>Stockholder allocation</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":92086331}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=R[-18]C[0]-R[-2]C[0]"><strong>92,086,331</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - %"}'><strong>- %</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.8000000052125}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=R[-1]C[0]/R[-19]C[0]"><strong>80.00%</strong></td>
</tr>
<tr>
<td><strong>Per-share allocation</strong></td>
<td style="text-align: right;"><strong>1.1589273</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><h2>Schedule</h2><div>
<p>This event's schedule has pretty much nothing unusual, except for the addition of the short-selling ban period. Oh, there is one more thing. This event takes an unusually long time. We have like one and half months gap from now to the first round pricing. It is probably to avoid schedule conflict with another major rights offering, Samsung Heavy Industries, whose payment date falls on November 5th.</p>
<p>So, Doosan Infracore's first-round pricing will be November 11. And ex-rights are on November 3rd, with the subscription rights trading period falling on November 24~30. The issuer will confirm the final price on December 6th, and the listing date is December 28th.</p>
</div><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"BOD meeting"}'>BOD meeting</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44449}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 09. 10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Preliminary pricing"}'><strong>Preliminary pricing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44501}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 01</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights date"}'><strong>Ex-rights date</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44503}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 03</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Record date"}'>Record date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44504}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 11. 04</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade beginning"}'><strong>Subscription rights trade beginning</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44524}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 24</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Subscription rights trade ending"}'><strong>Subscription rights trade ending</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44530}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 11. 30</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final pricing"}'><strong>Final pricing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44536}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 12. 06</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stockholder subscription"}'>Stockholder subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44538}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 08</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Public subscription"}'>Public subscription</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44540}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 10</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Payment"}'>Payment</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44546}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 16</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Listing"}'>Listing</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44558}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'>2021. 12. 28</td>
</tr>
<tr><td colspan="2"></td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Short restriction begins"}'><strong>Short restriction begins</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44452}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 09. 13</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Short restriction ends"}'><strong>Short restriction ends</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44533}' data-sheets-numberformat='{"1":5,"2":"yyyy\". \"mm\". \"dd","3":1}'><strong>2021. 12. 03</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'><p>Source: DART</p></td></tr>
</tbody>
</table><p>The short-selling ban period is from September 13 to December 3rd. Investors who short-sell during this period cannot participate in this capital increase unless they purchase the same quantity they shorted within this period.</p><div class="content-highlight"><p>There seems to be a lot of confusion about this. According to the official documents of the FSC, it is not that only the quantity sold short during the short-selling ban period cannot participate in the rights issue. If we short-sell even one share during this period, we will be completely banned from participating in the rights issue. Then, the only exception is to buy more than the number of stocks short-sold during this period.</p></div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/229/161/original/Screen+Shot+2021-09-10+at+11.09.54+AM.png?1631287116" class="editor-image img-responsive" data-smartkarma-image-id="229161"></figure></section><h2>Pricing</h2><p>The procedure for determining the offering price is as follows, again nothing unusual here. The discount rate of this event is 20%, which is the usual discount rate for local rights offerings. Just, this is a bit less aggressive than the 15% discount rate of Samsung Heavy Industries announced last month. Given the current market liquidity, it seems to me that Doosan Infracore could have gone for a little more aggressive discount, say 15%.</p><table class="table table-striped">
<colgroup>
<col width="400">
<col width="400">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Pricing"}'>Pricing</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1st round"}'><strong>1st round</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RP × (1 - 20%) / [1 + (144.75% × 20%)]"}' data-sheets-formula='="RP × (1 - "&amp;(R[11]C[0]*100&amp;"%")&amp;") / [1 + ("&amp;(R[12]C[0]*100&amp;"%"&amp;" × "&amp;(R[11]C[0]*100&amp;"%"&amp;")]"))'><strong>RP × (1 - 20%) / [1 + (144.75% × 20%)]</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'><strong>- Reference price (RP)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]"}'><strong>Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'><strong>- Reference date</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44501}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[41]C[0]"><strong>2021. 11. 01</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ex-rights base price"}'>Ex-rights base price</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"[RP + (1st × 144.75%)] / (1 + 144.75%)"}' data-sheets-formula='="[RP + (1st × "&amp;R[9]C[0]*100&amp;"%"&amp;")] / (1 + "&amp;R[9]C[0]*100&amp;"%"&amp;")"'>[RP + (1st × 144.75%)] / (1 + 144.75%)</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'>- Reference price (RP)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Previous close"}'>Previous close</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44503}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[39]C[0]">2021. 11. 03</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2nd round"}'><strong>2nd round</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"RP × (1 - 20%)"}' data-sheets-formula='="RP × (1 - "&amp;(R[5]C[0]*100&amp;"%")&amp;")"'><strong>RP × (1 - 20%)</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference price (RP)"}'><strong>- Reference price (RP)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Min [Close, Avg (Close, 1W VWAP)]"}'><strong>Min [Close, Avg (Close, 1W VWAP)]</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'><strong>- Reference date</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44536}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[40]C[0]"><strong>2021. 12. 06</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Final"}'>Final</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Max [Min (1st, 2nd), 3D VWAP × 60%]"}'>Max [Min (1st, 2nd), 3D VWAP × 60%]</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Reference date"}'>- Reference date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44536}' data-sheets-numberformat='[null,5,"yyyy\". \"mm\". \"dd",1]' data-sheets-formula="=Terms!R[38]C[0]">2021. 12. 06</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount rate"}'><strong>Discount rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2}' data-sheets-numberformat='[null,3,"0.00%",1]'><strong>20.00%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Capital increase rate"}'><strong>Capital increase rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.4475}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=LEFT(Terms!R[11]C[0],7)*100/100"><strong>144.75%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

OverviewThis is again an offering to the stockholders with forfeited shares going to a public offering. A total of 115 million new shares are issued, and the tentative issuance price is set at ₩6,950. So, the total issuance size is ₩0.8T.





Overview

Target
A public offering of forfeited shares after offering to stockholders


Transferability
Renounceable


Offering volume
115,107,913


Preliminary price
₩6,950


Preliminary value
₩799,999,995,350


Oversubscription privilege
20.00%


Banker
KB, NH, KIS, Mirae Asset, Hana, Samsung, DB, Daishin, &amp; Hi


- Underwriting type
Standby

Source: DART

The tentative issuance price of ₩6,950 was calculated based on this formula: Average [1M VWAP, 1W VWAP, 1D Close], as of September 9, 2021.AllocationCurrently, the number of issued common stock is 79.5 million. So the capital increase rate is a whopping 144.75%, and the dilution per share is 59.14%. Since 20% is allocated to the ESOP, the allocation ratio to stockholders is 1.1589273.





Allocation

Offering volume
115,107,913


Capital increase
144.75%


Dilution
59.14%


Total shares after rights offer
194,629,850


ESOP allocation
23,021,582


- %
20.00%


Stockholder allocation
92,086,331


- %
80.00%


Per-share allocation
1.1589273

Source: DART

Schedule
This event's schedule has pretty much nothing unusual, except for the addition of the short-selling ban period. Oh, there is one more thing. This event takes an unusually long time. We have like one and half months gap from now to the first round pricing. It is probably to avoid schedule conflict with another major rights offering, Samsung Heavy Industries, whose payment date falls on November 5th.
So, Doosan Infracore's first-round pricing will be November 11. And ex-rights are on November 3rd, with the subscription rights trading period falling on November 24~30. The issuer will confirm the final price on December 6th, and the listing date is December 28th.






Schedule

BOD meeting
2021. 09. 10


Preliminary pricing
2021. 11. 01


Ex-rights date
2021. 11. 03


Record date
2021. 11. 04


Subscription rights trade beginning
2021. 11. 24


Subscription rights trade ending
2021. 11. 30


Final pricing
2021. 12. 06


Stockholder subscription
2021. 12. 08


Public subscription
2021. 12. 10


Payment
2021. 12. 16


Listing
2021. 12. 28



Short restriction begins
2021. 09. 13


Short restriction ends
2021. 12. 03

Source: DART

The short-selling ban period is from September 13 to December 3rd. Investors who short-sell during this period cannot participate in this capital increase unless they purchase the same quantity they shorted within this period.There seems to be a lot of confusion about this. According to the official documents of the FSC, it is not that only the quantity sold short during the short-selling ban period cannot participate in the rights issue. If we short-sell even one share during this period, we will be completely banned from participating in the rights issue. Then, the only exception is to buy more than the number of stocks short-sold during this period.PricingThe procedure for determining the offering price is as follows, again nothing unusual here. The discount rate of this event is 20%, which is the usual discount rate for local rights offerings. Just, this is a bit less aggressive than the 15% discount rate of Samsung Heavy Industries announced last month. Given the current market liquidity, it seems to me that Doosan Infracore could have gone for a little more aggressive discount, say 15%.





Pricing

1st round
RP × (1 - 20%) / [1 + (144.75% × 20%)]


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]


- Reference date
2021. 11. 01


Ex-rights base price
[RP + (1st × 144.75%)] / (1 + 144.75%)


- Reference price (RP)
Previous close


- Reference date
2021. 11. 03


2nd round
RP × (1 - 20%)


- Reference price (RP)
Min [Close, Avg (Close, 1W VWAP)]


- Reference date
2021. 12. 06


Final
Max [Min (1st, 2nd), 3D VWAP × 60%]


- Reference date
2021. 12. 06


Discount rate
20.00%


Capital increase rate
144.75%

Source: DART



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