QIC Inside Investor Relations Volume 52: Shareholder Activism has spread from Japan and South Korea to Taiwan
Picture Source: WallStreetMojo
Shareholder Activism, a trend that has been sweeping through Asia, has set its sights on Taiwan, being considered the next battleground for international institutional investors. Mr. Alex Lee, the Founder and CEO of Quantum International Corp. (QIC), highlighted today that among the listed companies facing board of directors elections next year, 70 have directors and supervisors holding less than 20% of shares and foreign investors holding more than 10%. Mr. Lee emphasized that Taiwanese companies must proactively engage in shareholder communication to mitigate the risks of ownership disputes. He further emphasized that Taiwan is poised to become a crucial market for shareholder activism, and local businesses should strategically plan and prioritize effective shareholder communication.
Shareholder activism involves external shareholders using their rights to influence corporate decision-making, a prevailing practice in European and US markets. In recent years, this trend has started to gain momentum in Japanese and South Korean capital markets. According to statistics from Georgeson, the world's largest proxy solicitation and corporate governance consulting firm, in Japan and South Korea alone, since last year, 19 and 20 companies, respectively, including Fujitec and Shinhan Financial Group, have faced successful or partially successful proposals from activist shareholders, with some activists holding as little as 0.01% of shares.
An illustrative example is Dai Nippon Printing, a major semiconductor materials manufacturer in Japan. Under the demand from Elliott Management, one of the world's largest activist funds, the company announced its largest-ever share buyback plan in February of this year, leading to an 18% surge in the closing stock price on the same day, reaching a new 16-year high.
Mr. Alex Lee pointed out that the increasingly active shareholder activism seen in Japan and South Korea in recent years is now spreading to Taiwan. Previously, proxy fights in Taiwan were primarily categorized into three major types: family disputes, major shareholders' disagreements, and external predators. However, in recent times, foreign shareholders have participated in shareholders' meetings of Taiwanese casing manufacturer Catcher Technology, voicing their opinions on the company's operational strategies. This indicates a signal to Taiwan's corporate landscape, and it is anticipated that activist shareholders will become more active in Taiwan.
Mr. Alex Lee stressed that foreign ownership in Taiwan's capital market has steadily risen from 29.5% in early 2010 to 38.7% in March 2023. Foreign opinions carry significant influence over the outcomes of board of directors elections. According to QIC's data, over 400 listed companies will conduct board of directors elections next year, among which 240 companies have directors and supervisors holding less than 20% of shares, and 70 companies have foreign investors holding more than 10% of shares. Given the rising tide of shareholder activism in Japan and South Korea, it is foreseeable that activist shareholders will become increasingly active in Taiwan.
Looking back at the past three years, numerous Taiwanese companies have faced proxy fights, such as Solar Applied Materials Technology, Ace Dragon Corp., Teco, Concord Securities, and Taiwan Styrene Monomer Corporation 2021; Evergreen Group, Kinpo Electronics, Roohsing, Taiwan Land Development Corporation, United BioPharma, and Lung Ming Green Energy Technology Engineering Co., in 2022; and Shin Kong Financial Holding, Taisun, and IBF Financial Holdings in 2023. Taiwanese businesses should proactively prepare and engage in shareholder communication in advance of next year's board of directors elections, aiming for strong support during the election process.
QIC has worked with many listed companies in Taiwan on addressing shareholder activism. Our team consists of experienced professionals who previously worked at well-known equities houses and buyside funds. Our deep understanding of investor voting behaviors, corporate governance and the proxy landscape, can help you formulate the right strategies in handling an activist situation. If you are interested and looking for guidance in developing a defense strategy, please reach out to us.
Contact: yvonnehuang@qtumic.com