Companies listed on the Korean stock exchange are increasingly concerned about their shares being owned by foreigners, as Elliott Associates has raised an objection to the merger between Samsung C&T and Cheil Industries.
According to industry sources, foreign corporations are in possession of at least 5 percent shares in a total of 88 listed Korean companies and foreign individual investors are exerting influence in 26 companies while foreign organizations own 5 percent or more shares in 167 companies.
Elliott Associates is regarded as one of the world’s 10 largest activist investors. It is well known for having taken huge profits by means of litigation in Latin America after its acquisition of distressed sovereign debts. Such activist investors are characterized by focusing on taking margins by buying stocks and then altering companies instead of estimating share price movements.
Experts point out those in which foreigners take up at least 10 percent of the shares are the first to fall prey because they are vulnerable to hostile M&As based on collusion with the other shareholders or pressure on the majority shareholders and top management. Also, the same risks appear when the percentage is 5 percent or more, but the shares are owned for the purpose of participation in business activities.
“Systemic measures for the protection of business rights should be prepared without delay,” said an industry insider, adding, “Possible options include disproportionate voting rights and mandatory bids, both of which are in wide use in the United States, Japan, etc.” In Korea, the latter was repealed in 1998 after the full opening of the capital market that followed the financial crisis. The former, in the meantime, has remained on the table for years.