Secured Foreign Investor Support and Gained Board Seats, Enhancing Company Oversight
A game company, to consolidate its incumbent management, conducted a share swap with another company by issuing new shares through capital increase, which triggered the dissatisfaction of the major shareholders (the dissident) and sparked a proxy fight. QIC, representing the dissident, communicated and negotiated with international proxy advisory firms and foreign institutional investors regarding the director candidates it nominated. Through in-depth analysis and discussion of the share swap, the company's performance, and the professional experience of the director candidates, the dissident obtained support from foreign investors.
Client Challenge
When facing a proxy fight, it is quite challenging for the dissident to obtain the support from foreign investors. Typically, foreign investors believe that shareholders should respect the board of directors and management to a certain extent on strategic matters. Unless there are obvious problems, they generally do not oppose the incumbent directors or support the dissident's candidates. Furthermore, although the dissident has repeatedly stated that they have no intention of seizing management, the management has been using false accusations to attack the dissident in the media and communications with foreign investors. The dissident must through a comprehensive and precise discourse, not only respond to these false accusations but also convince investors of the importance of reforming the company's board of directors.
The QIC Advantage
Identifying Foreign Shareholders: Since the dissident was unable to obtain the company's shareholder register, QIC assisted the client in identifying the major foreign institutional shareholders of the target company as the target communication objects, to seek support from foreign investors.
Developing Discussion for Communicating with Foreign Institutions: In the proxy fight, communication with investors is crucial. We assisted the dissident candidates in analyzing the rationality and legitimacy of the share swap carried out by the management, as well as the problems in the management's operations and corporate governance. At the same time, we responded to the accusations of the management and described how the professional background and experience of the dissident’s candidates would effectively fulfill the supervisory responsibilities of the board of directors, to achieve the goal of sustainable operation and implementation of corporate governance.
Engagement with Proxy Advisory and Institutional Investors: In addition to domestic media exposure, QIC contacted foreign shareholder activist organizations to expose relevant information about the client's shareholders' meeting. The platform is subscribed to by many foreign institutional investors, thus raising awareness among them regarding the battle for control over the company's management. QIC assisted the dissident candidates in completing the presentation and letters for communicating with foreign investors and discussed with the representative director candidates. At the same time, the presentation was sent to the international proxy advisory firms and the target foreign shareholders. Although one of the proxy advisory firms later recommended supporting the management candidates, we also assisted the client in promptly responding to the unreasonable parts of the recommendation report to the institutions and investors, urging them not to follow the voting recommendations. In addition, we arranged for the client to negotiate directly with the two major foreign institutional shareholders, explaining the position and plans of the dissident’s candidates, to further seek their support.
Results
Obtaining Support from International Proxy Advisory Firms and Nearly Half of Foreign Shareholders
One of the international proxy advisory firms issued a very rare voting recommendation, not only opposing the entire succession team (including the chairman) but also recommending that investors cumulatively vote to support the candidates nominated by the dissident. Even in the case where another international proxy advisory firm supported the management’s candidates, through active communication with major shareholders, the dissident was able to secure the support of nearly 50% of foreign shareholders.
