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

Jeil Pharma Holdings (002620)​: ₩377bil Tender Event Summary

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/2301" target="_blank" data-smartkarma-citation="entities:2301:1">Jeil Pharma Holdings (002620 KS)</a>' swap price for the tender offer to the <a href="https://www.smartkarma.com/entities/27529" target="_blank" data-smartkarma-citation="entities:27529:1">Jeil Pharmaceutical (271980 KS)</a> shareholders is set at ₩23,950 based on the Oct 19~23 VWAP at a 0% discount. <strong>The current spread is at 12.76%</strong> at the Oct 23 closing prices of ₩23,400 for Holdings and ₩46,800 for Pharmaceutical.</li>
<li>This is a small company and retail shareholders account for more than 80% of daily trading. So, liquidity may be an issue to many arb traders. Not only that, the major shareholder has nearly enough shares to meet the target (7M).</li>
<li>But the market is now hearing an interesting development within the major shareholder. It seems that only about 70% of the target will be taken by the major shareholder. Then, an actual room for arb traders to sneak in is about 30% of the target, which of course is still risky proration wise but not terribly thin either.</li>
<li>So, this event is certainly worthy of our attention. It'd not be easy to borrow Holdings shares, but if you can, then I suggest making this arb trade while the spread remains juicy enough.</li>
</ul>



Jeil Pharma Holdings (002620 KS)' swap price for the tender offer to the Jeil Pharmaceutical (271980 KS) shareholders is set at ₩23,950 based on the Oct 19~23 VWAP at a 0% discount. The current spread is at 12.76% at the Oct 23 closing prices of ₩23,400 for Holdings and ₩46,800 for Pharmaceutical.
This is a small company and retail shareholders account for more than 80% of daily trading. So, liquidity may be an issue to many arb traders. Not only that, the major shareholder has nearly enough shares to meet the target (7M).
But the market is now hearing an interesting development within the major shareholder. It seems that only about 70% of the target will be taken by the major shareholder. Then, an actual room for arb traders to sneak in is about 30% of the target, which of course is still risky proration wise but not terribly thin either.
So, this event is certainly worthy of our attention. It'd not be easy to borrow Holdings shares, but if you can, then I suggest making this arb trade while the spread remains juicy enough.


Huge Spread Opening in Jeil Pharma Holdings Tender Event: Spread Is Now at +12%