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

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Clepsydra Capital

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

Event-Driven

<p>On October 28, 2019, Kakao and SK Telecom exchanged shares worth ₩300B to establish a partnership. In addition, the two companies promised close cooperation in the four areas through this stake swap.</p><table class="table table-striped"><tbody>
<tr>
<td style="width: 33.3333%;">Stock swap detail</td>
<td style="text-align: center; width: 33.3333%;">SK Telecom</td>
<td style="text-align: center; width: 33.3333%;">Kakao</td>
</tr>
<tr>
<td style="width: 33.3333%;">Number of shares exchanged</td>
<td style="text-align: center; width: 33.3333%;">1,266,620 shares</td>
<td style="text-align: center; width: 33.3333%;">
<p>2,177,401 shares</p>
<p>(before the 1 for 5 stock split)</p>
</td>
</tr>
<tr>
<td style="width: 33.3333%;">As a % of the total shares</td>
<td style="text-align: center; width: 33.3333%;">1.6%</td>
<td style="text-align: center; width: 33.3333%;">2.5%</td>
</tr>
<tr><td colspan="3" style="width: 33.3333%;">Source: DART</td></tr>
</tbody></table><p>SK Telecom recorded a jackpot return due to a surge in the stock price of Kakao. As a result, the value of the stake in Kakao held by SK Telecom has increased from ₩300B in the initial stage to ₩1.69T now.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Stock exchange detail"}'>Stock exchange detail</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"SK Telecom Co Ltd"}'>SK Telecom Co Ltd</td>
<td style="text-align: center;" data-sheets-value='{"1":2,"2":"Kakao Corp"}'>Kakao Corp</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Price on October 28, 2019"}'>Price on October 28, 2019</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":237000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>₩237,000</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":28000}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>₩28,000</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":324500}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>₩324,500</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":155500}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>₩155,500</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Price gain"}'>- Price gain</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":0.3691983122362869}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>36.92%</td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":4.553571428571429}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>455.36%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current stake value"}'><strong>Current stake value</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":411.01819}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'><strong>₩411.0B</strong></td>
<td style="text-align: center;" data-sheets-value='{"1":3,"3":1692.9292775}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B","3":1}'><strong>₩1,692.9B</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/258/original/Screen+Shot+2021-06-25+at+12.18.29+AM.png?1624595549" class="editor-image img-responsive" data-smartkarma-image-id="215258"></figure></section><p>The two companies planned to strengthen business cooperation. However, for SK Telecom, the result came from an unexpected place.</p><p>As SK Telecom is not a financial investor, it says that it has no immediate plans for Kakao equity valuation gains. Nevertheless, it is questionable how long the company will hold stakes in other companies worth close to SK Telecom's one-year operating profit.</p><p><strong>So, the local market is paying attention to the possibility of SK Telecom ending its business cooperation relationship with Kakao and selling its stake, as in the case of Netmarble, which invested in NCsoft in the past.</strong></p>

On October 28, 2019, Kakao and SK Telecom exchanged shares worth ₩300B to establish a partnership. In addition, the two companies promised close cooperation in the four areas through this stake swap.

Stock swap detail
SK Telecom
Kakao


Number of shares exchanged
1,266,620 shares

2,177,401 shares
(before the 1 for 5 stock split)



As a % of the total shares
1.6%
2.5%

Source: DART
SK Telecom recorded a jackpot return due to a surge in the stock price of Kakao. As a result, the value of the stake in Kakao held by SK Telecom has increased from ₩300B in the initial stage to ₩1.69T now.







Stock exchange detail
SK Telecom Co Ltd
Kakao Corp


Price on October 28, 2019
₩237,000
₩28,000


Current price
₩324,500
₩155,500


- Price gain
36.92%
455.36%


Current stake value
₩411.0B
₩1,692.9B

Source: KRX

The two companies planned to strengthen business cooperation. However, for SK Telecom, the result came from an unexpected place.As SK Telecom is not a financial investor, it says that it has no immediate plans for Kakao equity valuation gains. Nevertheless, it is questionable how long the company will hold stakes in other companies worth close to SK Telecom's one-year operating profit.So, the local market is paying attention to the possibility of SK Telecom ending its business cooperation relationship with Kakao and selling its stake, as in the case of Netmarble, which invested in NCsoft in the past.

Kakao Block Deal Risk, Potentially Initiated by SK Telecom