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

LG Corp/LX Holdings: Official Base Prices & Index Calculation Timeline & Treatment Clarification

LG Corp: Block Deal Concern Causes an Even Harsher Correction

Gravity Works As WeWork Doesn't; Now Plan B

Clepsydra Capital

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

Event-Driven

<p>The last remaining step in the LG Group split is the exchange of shares between the major shareholders, as the largest shareholder of LX Holdings is still LG Group Chairman Koo Kwang-mo.</p><p>The stake exchange method is highly likely to be cross-trading through after-hours trading. This is the method used when the GS group was separated from the LG group. GS Group started to exchange shares one month after being separated from LG Group in 2004. Therefore, the market expects that the share exchange between LG and LX Holdings will also start in the not-too-distant future.</p><h2><strong>Then, the key is the difference in value that occurs during the exchange of shares.</strong></h2><p>The shares to be exchanged are an 8.32% stake in LG Holdings owned by LX Chairman Koo Bon-joon and his son and a 47.57% stake in LX Holdings owned by LG Chairman Koo Kwang-mo and other family members.</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":"Major shareholding"}'>Major shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>LG Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LX Holdings Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>LX Holdings Corp</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16123.3517825}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]/1000000000">₩16,123.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":861.971797}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]/1000000000">₩862.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Koo Kwang-mo"}'>Koo Kwang-mo</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1595}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>15.95%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1595}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>15.95%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Market value"}'>- Market value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2571.67460930875}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'>₩2,571.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":137.48450162150002}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'><strong>₩137.5B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"The other family members"}'>The other family members</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2162}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=45.89%-R[-2]C[0]-R[2]C[0]">21.62%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2162}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=45.89%-R[-2]C[0]-R[2]C[0]"><strong>21.62%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Market value"}'>- Market value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3485.8686553765}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'>₩3,485.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.3583025114}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'><strong>₩186.4B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Koo Bon-joon &amp; his son"}'>Koo Bon-joon &amp; his son</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0832}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=7.72%+0.6%"><strong>8.32%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0832}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=7.72%+0.6%">8.32%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Market value"}'>- Market value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1341.462868304}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'><strong>₩1,341.5B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":71.7160535104}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'>₩71.7B</td>
</tr>
<tr><td colspan="3"><strong> </strong></td></tr>
<tr>
<td><strong>Swap target</strong></td>
<td style="text-align: right;"><strong>₩1,341.5B</strong></td>
<td style="text-align: right;"><strong>₩323.8B</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: KRX FIND"}'>Source: KRX FIND</td></tr>
</tbody>
</table><p>These are ₩1,341.5B and ₩323.8B, respectively. The difference in value is ₩1,024.2B. According to the Fair Trade Act, LX Chairman Koo Bon-joon can hold less than 3% in LG Holdings. So, if Chairman Koo Bon-joon decides to hold a 3% stake in LG Holdings, the difference in value at the time of the exchange of shares will be ₩533.9B.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Koo Bon-joon needs to buy"}'>LX Holdings stake that Koo Bon-joon needs to buy</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Koo Kwang-mo"}'>Koo Kwang-mo</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":137.48450162150002}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-8]C[1]">₩137.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"The other family members"}'>The other family members</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.3583025114}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-7]C[1]">₩186.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Total"}'>- Total</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":323.8428041329}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=sum(R[-2]C[0]:R[-1]C[0])">₩323.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Difference"}'><strong>Difference</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1017.6200641711}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-7]C[0]-R[-1]C[0]"><strong>₩1,017.6B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Keeping a 3% stake"}'><strong>Difference if keeps a 3% stake in LG Holdings</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":533.9195106960999}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=(R[-14]C[0]*(R[-9]C[0]-3%))-R[-2]C[0]"><strong>₩533.9B</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

The last remaining step in the LG Group split is the exchange of shares between the major shareholders, as the largest shareholder of LX Holdings is still LG Group Chairman Koo Kwang-mo.The stake exchange method is highly likely to be cross-trading through after-hours trading. This is the method used when the GS group was separated from the LG group. GS Group started to exchange shares one month after being separated from LG Group in 2004. Therefore, the market expects that the share exchange between LG and LX Holdings will also start in the not-too-distant future.Then, the key is the difference in value that occurs during the exchange of shares.The shares to be exchanged are an 8.32% stake in LG Holdings owned by LX Chairman Koo Bon-joon and his son and a 47.57% stake in LX Holdings owned by LG Chairman Koo Kwang-mo and other family members.







Major shareholding
LG Corp
LX Holdings Corp


Market cap
₩16,123.4B
₩862.0B


Koo Kwang-mo
15.95%
15.95%


- Market value
₩2,571.7B
₩137.5B


The other family members
21.62%
21.62%


- Market value
₩3,485.9B
₩186.4B


Koo Bon-joon &amp; his son
8.32%
8.32%


- Market value
₩1,341.5B
₩71.7B

 

Swap target
₩1,341.5B
₩323.8B

Source: KRX FIND

These are ₩1,341.5B and ₩323.8B, respectively. The difference in value is ₩1,024.2B. According to the Fair Trade Act, LX Chairman Koo Bon-joon can hold less than 3% in LG Holdings. So, if Chairman Koo Bon-joon decides to hold a 3% stake in LG Holdings, the difference in value at the time of the exchange of shares will be ₩533.9B.





LX Holdings stake that Koo Bon-joon needs to buy

Koo Kwang-mo
₩137.5B


The other family members
₩186.4B


- Total
₩323.8B


Difference
₩1,017.6B


Difference if keeps a 3% stake in LG Holdings
₩533.9B

Source: KRX



LG Corp: Major Shareholder Stock Swap Situation Checkup