This situation is going to end up being nastier than people think.

reuters.com/world/asia-pac…
The details are not out officially, but the "loser" here ADC (9318 JP) (which is an arm of Sun Hung Kai & Co) apparently didn't have their votes counted (because they are on margin).

They say that if their votes had been counted, it would have gone the other way. ImageImage
The Tokyo District Court will review the case later this coming week and I expect that whoever loses will appeal.

For my part, I think the history and operation of ADC is dodgy.

It comes from Sun Hung Kai's takeover of a large stake in the company when it was called J Bridge,
in 2010, and those in the market for 15yrs or so may know that it was a dodgy racket where its promoters got convicted for securities fraud. Before that it was a small warehouse co.

ADC in its current incarnation is an "investment" company which runs a fund (which owns TKS
stock), a broker, which acts as the local broker for Sun Hung Kai interests as far as I can tell, backing up margin purchases to the JSFC, and a "business finance" company.

It owns 99-100% of a bunch of companies, many of which have negative equity. It invested in a pawnshop ImageImage
business in Tokyo, which has negative equity to the tune of 20% of annual revenues, and is being shut down.

It put $5mm+ of capital into a Japanese restaurant in Fujian Province in China, which has negative equity and which is being shut down.

It owns two Malaysian companies
called Cleath Energy and Cleath Biomass Energy.

You guessed it... They both have negative equity... and.... you guessed it... they are being shut down. Image
The Business Finance arm which lends to companies (presumably under stress) has ¥99mm of capital but has ¥540mm of negative equity.

There are a lot of "investments" here which seem to do little and lose a lot of money. And they share directors.
It has a company called Prominence Investments Pte Ltd in Singapore with a mailbox address which has S$22mm in capital. The 9318 yuho says it is a company which "borrows money". The company was originally formed as J SINGAPORE INVESTMENTS PTE. LTD. back in its J Bridge days, and
was almost certainly used to get payments and investments in/out of an entity it was difficult to look into.

If one controls a company, which controls a sub, which buys assets from friends at inflated prices, and pays management consultancy fees to related parties, it is much
better hidden in an offshore sub.

ADC getting defeated at the EGM is going to get out the tiny violin orchestra, but TKS' defence (that the JSDA offered guidance in 2011 about margin providers voting shares on margin) is going to be an interesting case of SRO guidance against
Companies Act. And I frankly do not know which way it is going to go.

But I've got popcorn.

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More from @bauhiniacapital

19 Oct
Uh... no.

"Evergrande has announced that it will make interest payments on domestic bonds, even as the property developer teeters on the brink of a dollar debt default, deepening suspicious among offshore investors they will be last line for repayment."

asia.nikkei.com/Business/Marke…
THAT is the wrong way to think about this.

Company A has debt. Company B has debt. A owns 60% of B.

A is having trouble paying its debts.
B is having trouble paying its debts.

B has a bond coupon and pays it.
A has a bond coupon and doesn't pay it.

This is not "unfair".
A bondholders do not have recourse to the cash of B. B pays its debts, and if there is money left over, it might pay a dividend and A will have money to pay its bondholders. But B is not responsible for A's debts.

EVERRE is not the same as some other developer issuers.
Read 5 tweets
17 Oct
Taken in conjunction with the Zou Lan presser on Friday, and the PBOC meeting 29 Sep where they called everyone on the carpet, to say banks should lend continuing projects and approve mortgages for projects which have pre-sales approved, and the RMBS

bloomberg.com/news/articles/…
approvals late last week, not to mention the expansion of mortgage approvals in Harbin and elsewhere and the PBOC urging banks to deal with mortgage approvals faster, the financial regulatory backdrop is getting decidedly better near-term for developers which are "healthy."
The goal for those developers, if given a reprieve, should be to sell whatever assets they can sell to turn non-liquid book value into liquid book value, even if it means giving up land bank. The new sheriff of property development is OK with developers making a profit
Read 5 tweets
14 Oct
A subject worthwhile thinking about. A DM group discussed this a few days ago (chart h/t to 🔒) where I suggested the combo was a setup for the Fed raising rates faster/sooner than people think.

The timing is right. There is more buffer in place than people think.
Higher oil & commod prices, higher average wages, more benefits, higher rates, etc should all help dampen ProfitMargin/GDP, but it starts from a very high place. And the UER from a relatively low place (given the history in the 70s where inflation and slightly higher rates and
costs meant higher nominal GDP, and lower-trending labor share of GDP), and given the recent quit rate we are seeing, and the labor mobility rates, room is being made to shift people up the curve in many places, and to absorb more labor at the lowest income brackets.
Read 7 tweets
30 Sep
This FT article by @Urbandirt, @KanaInagaki, and @ArashMarkazi is SUPER-informative if you read between the lines.
And if you know your history of Elliott in Japan, you'd have a think about where the leak was sourced from.

And if you knew the history of activists in Toshiba, you'd have a think about about where the stock came from.

And if you were reading the tape closely, you might get
an idea about that, and then you'd have a think about what that would mean after the near-term completion of the strategic review process.

And if you knew the history of Toshiba, METI, and activists because you followed closely (and read the report)...

Read 4 tweets
28 Sep
US, at 70,000 cases a day, raises the alert on HK citing a "moderate" level of cases of covid.

HK has not had a local case in 41 days. Not a single case. It has had 2 in cases in 3+mos. Both working in airport lounges dealing with incoming pax.

bloomberg.com/news/articles/…
70,000 cases a day on a population the size of the US is equivalent to 1500-1700 cases a day in Hong Kong.

Hong Kong has had 12,000 cases... total. About 7-8 days' worth of the US on a population-equivalent basis.

HK has seen 213 deaths. About 1/80th the US rate per capita.
And I am told the 70k cases/day in the US understates the reality because of weekend/poor reporting. Actual numbers averaging 120k, which means HK's total caseload in 20mos is about 4-5 days of the current US rate on a population-equalised basis.
Read 4 tweets
22 Sep
It’s a holiday…

…so we’re goin’ to the moon!
It’s less impressive up close.

May try again after dark. Image
Looks small from a distance. Image
Read 5 tweets

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