Net Buying for 7 Consecutive Trading Days from the 13th to the 21st
Buying at the 110,000 Won Level Analyzed as a Game with Winning Chances
Foreign investors have been accumulating SM shares in the 110,000 KRW range for seven consecutive trading days. This is interpreted as a strategy to realize profits by responding to Kakao's tender offer, which runs until the 26th. While institutions' large-scale purchases in the 150,000 KRW range from the 7th to the 10th, anticipating a counter tender offer from HYBE, are considered a 'strategic failure,' foreign investors' purchases in the 110,000 KRW range are analyzed as a winnable game.
According to the Korea Exchange on the 22nd, foreigners have bought SM shares for seven consecutive trading days up to the previous day. During this period, they net purchased a total of 1,895,970 shares, amounting to about 200 billion KRW. Hyunyong Kim, a researcher at Hyundai Motor Securities, said, "Foreigners are aiming for the tender offer," adding, "At the current price, they can sufficiently realize profits." Kim explained, "Even if only 60% of the shares accumulated at the current 110,000 KRW level are tendered, a gap of more than 35,000 KRW will occur," and "Even if the remaining 40% are sold at a price 40,000 KRW lower than now, it breaks even." He added, "It seems foreigners believe SM's stock price will not fall below the 80,000 KRW level."
If SM shares are purchased at the closing price on the 21st (113,500 KRW), a 32% profit can be realized compared to the tender offer price (150,000 KRW). Kakao Group is tendering up to 35% (about 8.33 million shares) of SM's total issued shares. Excluding shares held by major shareholders, the floating shares available for tender are about 17.515 million shares. If all these shares participate in the tender offer, the competition ratio would be approximately 2.1 to 1.
If 200 SM shares were bought at the closing price on the 21st, Kakao would tender 96 of these shares at 150,000 KRW, yielding a profit of 3.36 million KRW. The remaining 104 shares must be sold on the open market. To break even, the investor must sell these 104 shares at no less than 81,193 KRW per share (excluding taxes).
Since this is classified as an over-the-counter transaction, if the capital gains exceed 2.5 million KRW, a 22% capital gains tax must be paid on the excess amount. Additionally, a 0.35% securities transaction tax is separately imposed.
In the futures market, which reflects future prices, SM's stock price has fallen to the mid-80,000 KRW range. According to the Korea Exchange, SM stock futures expiring on April 13 closed at 85,600 KRW on the 21st, down 1,800 KRW (2.06%) from the previous day. While the spot market price remains in the 110,000 KRW range due to Kakao's tender offer, futures trading, which settles in mid-next month, is occurring below 90,000 KRW.
The market expects that although the stock price adjusted once after the HYBE and Kakao agreement, it will undergo further adjustment starting from the 27th, after the tender offer concludes. A securities firm official said, "The tender offer price of 150,000 KRW corresponds to a price-earnings ratio (PER) of about 40, while the current price in the 110,000 KRW range corresponds to a PER of 28 to 29," adding, "Compared to competitors like YG Entertainment (21) and JYP Ent. (29), it is relatively high, and further adjustments may occur after the tender offer ends on the 26th."
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