Activist Investment
While an inheritance dispute has broken out between members of the owning family of LG Group, LG’s stock prices were shaken as an activist fund made a surprise appearance as a major shareholder.
On April 12, LG closed at 93,500 won (US$71.18), posting a 9.48 percent (8,100 won) increase. Institutional investors made net purchases of LG stocks worth 24 billion won (US$18 million), raising the stock price. Individual investors and foreign investors recorded net sales of LG stocks worth 11 billion won (US$8.4 million) and 14 billion won (US$11 million), respectively. The trading volume reached 1,488,797 shares, a five-fold increase (392 percent) from the previous day.
The surge in LG’s stock price was fueled by the fact that Silchester International Investors, a British investment company, announced on the day that it owned 7,896,588 million shares (5.02 percent) of LG as of April 5. Silchester International Investors stated that it intended to own the LG stocks for general investment. This means that Silchester International Investors will not influence management rights in the future but it can make proposals to increase shareholder value, such as pressuring the management of LG to increase dividends, to sell off non-operating assets, and to improve LG’s corporate governance.
Industry insiders predict that LG will show an activist investment tendency when considering Silchester International Investors’ past shareholder activities. Silchester International Investors has owned more than 5 percent of KT’s shares since 2011. It changed the purpose of investment from simple profit to general investment in 2020 and aggressively took shareholder action.
Insiders of the financial investment industry say that Silchester International Investors’ activist investment is sufficiently justified. This is because experts have pointed out that LG’s capital allocation is not efficient. “Although LG has more than 2 trillion won in cash, investments for growth or dividend raises are not being carried out well,” said Lee Sang-heon, a researcher at Hi Investment & Securities. “Silchester International Investors may make a shareholder proposal in order to address these issues.”
Also of special note is that Silchester International Investors increased its stake in LG at a time when the LG owner family’s inheritance dispute was heating up. In a situation where LG Chairman Koo Kwang-mo is in a legal dispute over inheritance with his mother and his two younger sisters, Silchester International Investors’ voting rights can play an important role in shareholders’ meetings and others.