As a stock listed corporate or corporate with stock listed participation, you are exposed to fluctuations in equity markets. Those fluctuations can have a big impact on your balance sheet and consume a lot of capital. ING Wholesale Banking (WB)’s dedicated equity derivative specialists can help you with customised solutions that fit your underlying equity exposures, risk profiles and views.
Typical examples of equity derivative risks which need attention are management of treasury shares, hedging of stock option plans, and management of listed participations.
Treasury shares management
Supporting the share price by purchasing the shares on the cash equity market or protecting shareholders from a potential dilution (convertible bond, stock option plan exercise, etc.) by purchasing shares on the cash equity markets may be cash intensive and leave a substantial share price risk on the balance sheet, adding unwanted leverage.
ING WB offers derivative solutions that allow the corporate to have the economic exposure on its share, without having to finance it. ING WB also offers alternative derivative solutions to match the exact exposure and replicate the exact dilution exposure. ING WB also offers alternative buyback programmes that allow the corporate to purchase treasury shares at a discount to the current market price.
Stock option plan hedging
Corporates often issue stock-based incentives as part of their executive compensation plans. As the options’ and the shares’ sensitivity to a price move are not the same (the corporate runs a share price risk on the options and their hedge) and as the whole notional has to be funded for hedging via treasury share funding, corporates may want to use equity derivatives as an alternative to hedge those stock option plans.
ING WB offers solutions to exactly replicate the share based plans (purchase of replicating call options), that allow clients to free up cash and match the price risk. ING WB also offers solutions to actively manage the client’s options delta hedge, either by cash equity or by variable notional total return swaps, helping the corporate to execute its delta hedging.
Management of listed participations
A corporate may have stakes in one or more listed companies. ING WB can provide the following range of solutions depending on its intentions with regards to this participation.
ING WB offers derivative solutions that allow clients to exit a participation at a premium to the current market price, or to build-up a stake at a discount to the current market price. ING WB offers derivatives solutions that allow clients to keep an economic and legal exposure to the participation, without running a full price risk on the participation, or retain an economic and legal exposure to the participation while freeing up cash without raising debt. ING WB finally offers derivative solutions to increase the return on a participation in a suspected flat market and depending on the views of the corporate on the share price evolution. Get in touch and let our expert team assist you.