Shareholder activism is rising in Japan as Elliott steps in

12 Feb, 2020 02:47
source: Singularity Financial

Elliott Management, the $40 billion hedge fund run by Paul E. Singer, pushes for changes at Japan’s SoftBank Group Corp.

Elliot’s stake, which amounts to nearly 3 percent of SoftBank’s market value, is one of the hedge fund’s biggest current bets, two of the people with knowledge of the investment said.

SoftBank’s longtime strategy of dumping mountains of cash on promising young companies to create big winners failed dramatically at WeWork and is inviting scrutiny into the fund’s other investments.  Elliott has been urging changes at the company, three people familiar with the matter said on February 6th. Those moves could include stock buybacks, changes to SoftBank’s board or increased transparency for its $100 billion Vision Fund, driven by Mr. Son’s instinctive approach. He has been known to approve an eight-figure investment after a single meeting with a founder.

Several start-ups that the Vision Fund has invested in — including WeWork, Uber, the Indian hospitality start-up Oyo and the robotic pizza company Zume — have recently announced layoffs or scaled back their ambitions. In December, SoftBank sold its interest in the dog-walking start-up Wag at a loss after it laid off workers.

One of Elliott’s chief proposals is having SoftBank buy back up to $20 billion of its own shares, which should push up their price. The firm has also suggested shaking up SoftBank’s board, which has just two independent directors, and giving more transparency into the operations and management of the Vision Fund, which some investors have complained is a black box.

Issuers in Asia are more likely to seek settlements with activist investors than they were five years ago, due to activists’ increasing success rate in contested meetings across the region, according to data from Activist Insight.

Shareholder activists gained 40 board seats from 32 contested meetings in 2019, compared with 25 seats from 10 meetings in 2014, the study finds. Board battles between issuers and activist shareholders have gradually gone up since then, reaching a high of 32 contested meetings in 2017.

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