Tag: Finance

The first of a series of tech IPOs – Lyft debuted on Nasdaq today. With its stock priced at $72, Lyft is offering 32,500,000 shares of its Class A common stock, plus up to an additional 4,875,000 shares (raised $351 million in total).

The market cap excludes things like RSUs to be issued: 1) 77,390,807 shares of our Class A common stock reserved for future issuance under our equity compensation plans 2) 31,605,338 shares of our Class A common stock subject to RSUs outstanding, but for which the time-based vesting condition was not satisfied as of December 31, 2018 (including 15,065,349 shares of our Class A common stock subject to RSUs granted after December 31, 2018) 3) 7,037,379 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock outstanding as of December 31, 2018 (weighted average $4.74 exercise price)

Following up on the previous post of MSCI’s inclusion of 236 China A Shares last year, I created another list (in excel format) according to the recent update.

MSCI A-share List_2019Feb

MSCI will increase the weight of China A shares in the MSCI Indexes according to the following schedule:

• Step 1: MSCI will increase the index inclusion factor of all China A Large Cap shares in the MSCI Indexes from 5% to 10% and add ChiNext Large Cap shares with a 10% inclusion factor coinciding with the May 2019 Semi Annual Index Review.
• Step 2: MSCI will increase the inclusion factor of all China A Large Cap shares in the MSCI Indexes from 10% to 15% coinciding with the August 2019 Quarterly Index Review.
• Step 3: MSCI will increase the inclusion factor of all China A Large Cap shares in the MSCI Indexes from 15% to 20% and add China A Mid Cap shares, including eligible ChiNext shares, with a 20% inclusion factor to the MSCI Indexes coinciding with the November 2019 Semi-Annual Index Review.

On completion of this three-step implementation, there will be 253 Large and 168 Mid Cap China A shares, including 27 ChiNext shares, on a pro forma basis in the MSCI Emerging Markets Index, representing a weight of 3.3% in the pro forma index.

Again, there is no clear/editable list publicly available… Always a list in jpeg/png format.

Compared to the list of 236 large-cap stocks last year, there are 24 additions and 7 deletions, listed in separate sheets. (236+24-7=253)

One thing I found very odd when doing some research on the recent inclusion of China’s A-shares into MSCI’s indexes – there is even no easily-accessible and “readable” list…

“Lists” I saw are in the format of pictures.. not usable, considering the number of stocks are in hundreds.

(Really don’t understand why a simple list is protected… and available in uneditable form…)

And there is no consistent track of inclusion/exclusion of stocks publicly available.

Given that, I created excel lists [MSCI China A Shares List] of tickers proposed by MSCI with a history of different versions in 2018.

[For 2019 versions, please see the next post]

In this post, three versions are shared:

1. 5/15/2018 version with 234 stocks ->
2. 5/31/2018 version with 226 stocks (8 are removed due to reasons like suspension of trading, lack of buying opportunity, etc.) ->
3. 8/31/2018 version with 236 stocks (10 are added)

From 1 to 2, the 8 deleted stocks are:

• 002310 东方园林 (停牌原因)
• 600170 上海建工 (调出沪股通标的)
• 601390 中国中铁 (停牌原因)
• 600369 西南证券 (调出沪股通标的)
• 002450 ST康得新 (停牌原因)
• 000825 太钢不锈 (停牌原因)
• 601118 海南橡胶 (调出沪股通标的, 停牌原因)
• 000063 中兴通讯 (停牌原因)

From 2 to 3, the 10 added stocks are:

• 600760 中航沈飞
• 601088 中国神华
• 600050 中国联通
• 600795 国电电力
• 600346 恒力股份
• 600406 国电南瑞
• 000100 TCL 集团
• 000063 中兴通讯
• 600588 用友网络
• 601966 玲珑轮胎

Although China’s economy and stock market size has been growing fast, the underlying capital market mechanisms are not as advanced.

China has made several efforts to modernize its stock market, but mostly remained in the previous framework or didn’t become a game-changer.

This time is different.

Regulatory approvals are replaced by general registration processes (guidance and regulations still there). Any company that fulfills certain requirements can go public.

Pre-profit companies can go public. Previously, the stock market was heavily leaning towards sectors with profits like banking.

Different share structures are allowed. Super voting power is allowed.

Lock-up period is higher than NASDAQ’s.

—

Attached is a presentation from a major investment bank in China.

20190302.pdf

The $74 billion merger between Bristol and Celgene was an uncertain one, opposed by Wellington (more than 8% of BMY) & Starboard (recently added position of less than 0.5% of BMY).

The merger in assets actually makes sense to me and should make sense to many investors. But the question of BMY-only shareholders, who don’t own much CELG stocks, is that the benefits are probably captured unevenly by Celgene.

Suppose the base case for Celgene stock price without acquisition is $75 and the merger price is $50 cash + 1 BMY share ($52 value) + $9 option ($3 value) -> $105 per share – when it was traded at $90/share, the market suggested a probability 50% of a successful merger. [75*(1-p) + 105*p = 90]

When CELG was traded at $84, the market suggested a success rate of 30%. [75*(1-p) + 105*p = 84]

(Yes, the market just take simple numbers… )

Wellington/Starboard might just want to add more negotiation power to get some other benefits (special board treatment e.g.) or to load up some CELG…

BMY alone probably won’t perform very well, they should understand that.