As the shareholder meeting season approaches in March next year, activist funds are gearing up for more assertive actions. Some stocks targeted by activist funds are experiencing price fluctuations in anticipation of the resolution of undervaluation. The securities industry is anticipating that shareholder activities of activist funds will intensify in early next year.
According to the Korea Exchange on Dec. 13, Samsung C&T saw a surge in its stock price at the end of October. From Nov. 1 until that day, the stock price increased by over 20 percent. The stock price increase was triggered by attacks from British activist funds. On Dec. 6, Palliser Capital distributed materials urging the improvement of Samsung C&T’s governance structure. Last month, City of London Investment demanded an increase in dividends to 4,500 won (US$3.41) per share and the repurchase of 500 billion won worth of treasury stocks by next year.
Hyundai Elevator, which has been targeted by KCGI Asset Management, has also been experiencing a continuous upward trend in its stock price. The share price has risen by 55 percent since the beginning of the year. KCGI Asset Management sent an open shareholder letter last month, demanding improvements in the governance structure, including the resignation of Chairman Hyun Jeong-eun as an inside director. The chairman recently resigned from the board of directors.
KCGI Asset Management is also demanding the complete cancellation of its treasury shares, which amount to 7.64 percent. It is aiming to apply additional pressure through collaboration with the second-largest shareholder and foreign elevator company Schindler.
The target of activist funds is expanding beyond listed companies to real estate investment trusts (REITs) and other real estate investment entities. At the end of last month, KORAMCO Asset Management changed the purpose of its holdings in REITs such as Shinhan Alpha REIT, E-REITs KOCREF, IGIS Residence REIT, and IGIS Value Plus REIT from “simple investment” to “management participation.”
Funds that invest in companies targeted by activist investors are also being launched. Truston Asset Management is set to launch the “TRUSTON Shareholder Value Active” exchange-traded fund (ETF) this month, investing in stocks where shareholder value is expected to expand through governance improvements. The fund focuses on undervalued companies due to reasons such as low shareholder returns. In September, KCGI Asset Management also launched the activist public “ESG Co-growth Fund.”
The views on shareholder activism are divided. The securities industry argues that resolving the “Korea discount” through shareholder actions is necessary. However, the business community insists that the practice of attacking companies with small stakes should come to a halt. The hedge fund Palliser Capital, which demanded improvements in the governance structure of Samsung C&T, holds a stake of only 0.62 percent. KCGI Asset Management’s stake in Hyundai Elevator is also around 2 percent.