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

Ecopro Tender: Pro-Ration Results, KOSDAQ 150 Corporate Action & Est. Passive Impact

Ecopro Tender: Swap Ratio Finalized, Still Juicy Spread, & We Can Buy/Tender Now

Ecopro Tender: Undertaking Is a Bit Different but Should Offer a Fairly Juicy Arb Setup

Clepsydra Capital

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

Event-Driven

<p>The Ecopro tender spread is still compressed at the 2% level. The current arb yield stands at 2.54% at the last close. </p><table class="table table-striped">
<colgroup>
<col width="200">
<col width="200">
<col width="200">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap gain"}'>Swap gain</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Ecopro Co., Ltd."}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=Terms!R[-10]C[0]">Ecopro Co., Ltd.</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Ecopro HN Co Ltd"}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=Terms!R[-6]C[-1]">Ecopro HN Co Ltd</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Ticker"}'>Ticker</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"086520"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-10]C[0]">086520</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"383310"}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-6]C[-1]">383310</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current price"}'>Current price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":98400}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula='=googlefinance(Terms!R[-11]C[0], "price")'>₩98,400</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":111100}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula='=googlefinance(Terms!R[-7]C[-1], "price")'>₩111,100</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap price"}'>Swap price</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":95441}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-10]C[0]">₩95,441</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":110500}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=Terms!R[-6]C[-1]">₩110,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap ratio"}'>Swap ratio</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":1.157783342588615}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=R[-1]C[1]/R[-1]C[0]">1.1577833</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price for 100 shares of the target company"}'>Price for 100 shares of the target company</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":11110000}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-3]C[1]*100">₩11,110,000</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Number of new shares of the acquiring company"}'>Number of new shares of the acquiring company</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":115.7783342588615}' data-sheets-numberformat='{"1":2,"2":"#,##0.0000000","3":1}' data-sheets-formula="=100*R[-2]C[0]">115.7783343</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of the new shares at the current price"}'>Value of the new shares at the current price</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":11392588.091071973}' data-sheets-numberformat='{"1":2,"2":"[$₩-412]#,##0","3":1}' data-sheets-formula="=R[-1]C[0]*R[-5]C[0]">₩11,392,588</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Swap gain"}'>Swap gain</td>
<td colspan="2" rowspan="1" style="text-align: center;" data-sheets-value='{"1":3,"3":0.0254354717436519}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=(R[-1]C[0]-R[-3]C[0])/R[-3]C[0]">2.54%</td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART &amp; KRX"}'>Source: DART &amp; KRX</td></tr>
</tbody>
</table><p>The spread has not exceeded 3% since October 8, when short-selling restrictions were lifted and arb trading became possible.</p><div class="content-highlight"><p><strong>The main reason the spread is not widening is that the share price of Ecopro HN has risen, which paradoxically shows that short-term purchases for arb trading are influencing it strongly.</strong></p></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/519/original/image_27181164221634749642433.png?1634749643" class="editor-image img-responsive" data-smartkarma-image-id="236519"></figure><hr><p><strong>This tender event is briefly summarized as follows:</strong></p><ul>
<li>Acquirer: Ecopro Co., Ltd.</li>
<li>Stocks subject to purchase: Ecopro HN registered common stock (6,121,973 shares)</li>
<li>Payment method: Grant of new common stock of Ecopro Co., Ltd. (cash payment for fraction stocks)</li>
<li>Tendering period: October 13 ~ November 1, 2021</li>
<li>Tendering price: ₩110,500 per share</li>
<li>Ecopro Co., Ltd. issuance price of new shares: ₩95,441 per share</li>
<li>Stock exchange ratio: 1.1577833 (Ecopro 1.1577833 shares exchanged per 1 Ecopro HN share)</li>
<li>Stock settlement date and cash payment date (for fractional shares): November 4, 2021</li>
<li>Listing date: November 19, 2021</li>
<li>Subscription channel: must physically visit a Daishin Securities branch (+82 1588-4488)</li>
</ul><hr><p>The most active arb-trading institutional investors in stock swap events in the Korean local market are local brokerages/investment advisories. Since October 8, they have significantly increased their stock purchases of Ecopro HN. In other words, this proves that a significant level of arb trading is taking place in this event.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/527/original/Screen+Shot+2021-10-20+at+4.30.59+PM.png?1634761895" class="editor-image img-responsive" data-smartkarma-image-id="236527"></figure><p>Short-selling on Ecopro Co., Ltd. also increased significantly from October 8. For reference, October 12 was the day when Ecopro Co was shorting-restricted. By the way, we see a significant discrepancy on October 8 between local brokerages/investment advisories' net buying of Ecopro HN and the short-selling on Ecopro Co. It seems to be because those investors had bought Ecopro HN during the short-selling ban period short-sold Ecopro Co., Ltd on this day.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/236/535/original/Screen+Shot+2021-10-20+at+4.31.17+PM.png?1634765907" class="editor-image img-responsive" data-smartkarma-image-id="236535"></figure></section>

The Ecopro tender spread is still compressed at the 2% level. The current arb yield stands at 2.54% at the last close. 







Swap gain
Ecopro Co., Ltd.
Ecopro HN Co Ltd


Ticker
086520
383310


Current price
₩98,400
₩111,100


Swap price
₩95,441
₩110,500


Swap ratio
1.1577833


Price for 100 shares of the target company
₩11,110,000


Number of new shares of the acquiring company
115.7783343


Value of the new shares at the current price
₩11,392,588


Swap gain
2.54%

Source: DART &amp; KRX

The spread has not exceeded 3% since October 8, when short-selling restrictions were lifted and arb trading became possible.The main reason the spread is not widening is that the share price of Ecopro HN has risen, which paradoxically shows that short-term purchases for arb trading are influencing it strongly.This tender event is briefly summarized as follows:
Acquirer: Ecopro Co., Ltd.
Stocks subject to purchase: Ecopro HN registered common stock (6,121,973 shares)
Payment method: Grant of new common stock of Ecopro Co., Ltd. (cash payment for fraction stocks)
Tendering period: October 13 ~ November 1, 2021
Tendering price: ₩110,500 per share
Ecopro Co., Ltd. issuance price of new shares: ₩95,441 per share
Stock exchange ratio: 1.1577833 (Ecopro 1.1577833 shares exchanged per 1 Ecopro HN share)
Stock settlement date and cash payment date (for fractional shares): November 4, 2021
Listing date: November 19, 2021
Subscription channel: must physically visit a Daishin Securities branch (+82 1588-4488)
The most active arb-trading institutional investors in stock swap events in the Korean local market are local brokerages/investment advisories. Since October 8, they have significantly increased their stock purchases of Ecopro HN. In other words, this proves that a significant level of arb trading is taking place in this event.Short-selling on Ecopro Co., Ltd. also increased significantly from October 8. For reference, October 12 was the day when Ecopro Co was shorting-restricted. By the way, we see a significant discrepancy on October 8 between local brokerages/investment advisories' net buying of Ecopro HN and the short-selling on Ecopro Co. It seems to be because those investors had bought Ecopro HN during the short-selling ban period short-sold Ecopro Co., Ltd on this day.

Ecopro Tender Event: Pro-Ration Risk Analysis & Arb Spread Widening Possibilities