Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Isolite Insulating Products (5358 JP) : Tender Offer Looks Like a Done Deal

Mitsui Mining & Smelting TOB For Subsidiary MESCO (1737 JP)

Quiddity Advisors

Event-Driven

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/181/288/original/Ruby+Rhod+Slide+In.gif?1610016661" class="editor-image img-responsive" data-smartkarma-image-id="181288"></figure><p></p></section><p>A long time ago in a land far, far away, there was a small company which made sauce, which was the subject of a Tender Offer by an activist who had developed something of a reputation for being hostile. To defend itself, the company asked its shareholders to allow it to execute a poison pill and indeed it executed the poison pill which said that all investors<em> other than</em> the activist would get the opportunity to buy three new shares for every one share owned, for 1 yen each, while the activist was given a market price-based cash equivalent for three quarters of the new position. </p><div><p>The activist, Steel Partners, took it to court trying to get an injunction on the issuance of the warrants. The District Court allowed the issuance to go forward, Steel appealed, and the Tokyo High Court (the middle one in this case) decided Steel Partners was an "abusive acquirer." In August of 2007, the Supreme Court agreed with the lower courts and decided that the issuance could proceed.</p></div><div>
<div><p>It is generally thought amongst Tokyo legal experts that the case was a triumph for shareholder supremacy because shareholders had voted to create such a warrant system to dilute acquirers which an independent committee had determined to be detrimental or abusive. The conclusion by the company's board to go ahead with the issuance was at the behest of a process <em>pre-agreed</em> by shareholders. </p></div>
<div><p>The precedents which were seen to have been set in this case were that... </p></div>
<div>
<ul style="list-style-type: disc;">
<li>a company could defend itself against a hostile bidder (or perhaps shareholder) if that shareholder's actions were deemed to be detrimental to the corporate value of the company or to other shareholders. </li>
<li>But that such a defense had to be fair. In this case, Bulldog provided compensation for the share warrants issued to other shareholders.</li>
</ul>
<p>In hindsight, the result was far better for Steel Partners than for the other shareholders.</p>
<p>On a split-adjusted basis, 13+ years later, the shares have not recouped one-quarter of their price prior to when Steel Partners raised their bid. The fall in share price in the chart below was because of the massive new issuance. The shares should have fallen in price by three quarters to account for the new issuance. Instead, they fell by three quarters then fell by half again to account for the fact there was no more takeover premium. </p>
<p>At ¥1590 at today's close, that is ¥6360 pre-dilution. </p>
</div>
</div><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/181/287/original/Screenshot+2021-01-07+at+6.34.54+PM.png?1610015783" class="editor-image img-responsive" data-smartkarma-image-id="181287"></figure></section><p></p><p>So now, some 13 years later, we have a smidgen of good news. </p><h3>The Good News</h3><p>Today, after the close, the company <a href="https://www.bulldog.co.jp/common/upload/news/210107_etc.pdf" target="_blank" rel="noopener">announced</a> (Japanese only) that it had been accepted to move its shares from TSE2 to the TSE's First Section on 14 January. That means it will be included in TOPIX some 6 weeks later. </p><p>For those who follow the Quiddity TOPIX Inclusion Framework, this inclusion is GREEN.</p><p>It is, indeed... </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/181/289/original/SuperGreen.gif?1610016747" class="editor-image img-responsive" data-smartkarma-image-id="181289"></figure></section><p></p><p>And as always after that kind of introduction, there is more below the fold.</p>

A long time ago in a land far, far away, there was a small company which made sauce, which was the subject of a Tender Offer by an activist who had developed something of a reputation for being hostile. To defend itself, the company asked its shareholders to allow it to execute a poison pill and indeed it executed the poison pill which said that all investors other than the activist would get the opportunity to buy three new shares for every one share owned, for 1 yen each, while the activist was given a market price-based cash equivalent for three quarters of the new position. The activist, Steel Partners, took it to court trying to get an injunction on the issuance of the warrants. The District Court allowed the issuance to go forward, Steel appealed, and the Tokyo High Court (the middle one in this case) decided Steel Partners was an "abusive acquirer." In August of 2007, the Supreme Court agreed with the lower courts and decided that the issuance could proceed.
It is generally thought amongst Tokyo legal experts that the case was a triumph for shareholder supremacy because shareholders had voted to create such a warrant system to dilute acquirers which an independent committee had determined to be detrimental or abusive. The conclusion by the company's board to go ahead with the issuance was at the behest of a process pre-agreed by shareholders. 
The precedents which were seen to have been set in this case were that... 


a company could defend itself against a hostile bidder (or perhaps shareholder) if that shareholder's actions were deemed to be detrimental to the corporate value of the company or to other shareholders. 
But that such a defense had to be fair. In this case, Bulldog provided compensation for the share warrants issued to other shareholders.

In hindsight, the result was far better for Steel Partners than for the other shareholders.
On a split-adjusted basis, 13+ years later, the shares have not recouped one-quarter of their price prior to when Steel Partners raised their bid. The fall in share price in the chart below was because of the massive new issuance. The shares should have fallen in price by three quarters to account for the new issuance. Instead, they fell by three quarters then fell by half again to account for the fact there was no more takeover premium. 
At ¥1590 at today's close, that is ¥6360 pre-dilution. 

So now, some 13 years later, we have a smidgen of good news. The Good NewsToday, after the close, the company announced (Japanese only) that it had been accepted to move its shares from TSE2 to the TSE's First Section on 14 January. That means it will be included in TOPIX some 6 weeks later. For those who follow the Quiddity TOPIX Inclusion Framework, this inclusion is GREEN.It is, indeed... And as always after that kind of introduction, there is more below the fold.

TOPIX Inclusion: Bull-Dog Sauce (2804) Is SUPER GREEN

Bull Dog Sauce

TOPIX Inclusion: Bull-Dog Sauce (2804) Is SUPER GREEN