Activist retail investors take on the delay of Korean companies
Small Korean investors are trying to shake up the country’s creaking corporate landscape.
Amateur stock pickers across the country will gather on social media platform Kakaotalk and dedicated shareholder apps such as ACT, which has attracted over 110,000 users in the two years since its launch. Their purpose: to shock South Korea’s $1.9 trillion stock market. This has been traded for many years at a lower multiple than regional rivals like Japan and Taiwan.
“The South Korean financial system slows global standards and businesses need to be accountable,” said Younghee Won, a 66-year-old art instructor and amateur investor. “Online platforms translate our anger into action.”
This wave of grassroots activity means that South Korea’s listed companies are under pressure from all sides as politicians, regulators and foreign investment funds seek better governance. It eventually became a long-standing “local businesses.”Korea discount” – Adding fuel to the stock market, one of the best performers in the world so far this year.
It also transformed small investors into amazing political forces. Lee Jae-myeon, a left-leaning politician who won the presidential election last week, tried to establish himself as a shareholder champion. Promising It’s 80% higher than the current level to raise the standard for corporate governance, suppress curb operations, and set the Kospi index to 5,000 in the path.
CospiEntered a bull marketIt was about 1.7% higher in early Asian trades on Monday after winning Lee’s election.
The market is being boosted by foreign funds piling up stocks and growing optimism from Wall Street. A strategist at Goldman Sachs Group Inc. said in a weekend memo he upgraded Korean stocks from neutral to overweight, increasing the likelihood of capital market reform.
Growing influence
According to Goldman Sachs, South Korea’s retail investors currently account for almost 30% of the total population. The boom in inventory trading during the Covid-19 pandemic has led to the opening of millions of new accounts, driving the rise and hatch plans of online communities where you can learn about stock picking.
Shareholders of Korean companies submitted 168 proposals in the latest round of the annual general meeting, according to figures from the Aju Research Institute of Corporate Management Institute. This included 78 proposals that directly target management, calling for the appointment or removal of executives.
“Mineral shareholders are looking for a more active role in corporate governance,” said Nae Kim, Associate Director of the AJU. “If previously the focus was focused solely on returns, they now want their board to have their preferred directors so they can take part in management decisions.”
So far, the success of small investors has come from small companies with market values below $1 billion. In the recent round of its annual meeting in March, healthcare company Oscotec Inc. withdrew plans to re-appoint the CEO after a pushback from investors, while biotech companies Amicogen Inc and Dong Il Corp. appointed new auditors after small investors pushed it.
Oscotec, Amicogen, and Dong Il Corp. did not respond to requests for comment.
Naturally, many businesses try their best to resist or simply ignore these mini-activists. Kim, a school teacher who asked to be identified only by his last name, was very annoyed by one company in Korea where he holds stocks, and sent 400 letters to fellow investors he found in the company’s shareholder register and asked him to join the Kakao Talk group. Over 120 people have signed up.
“I had to print each one by hand and mail it,” he said. “I did everything myself outside of working hours while still maintaining my full-time job. The activism of shareholders is exhausting, irritating and candidly overwhelming.”
The company did not respond to numerous requests for clarity regarding Kim’s business performance, so he ultimately sold most of the stock. He took some shares out of a sense of obligation towards his fellow activists.
The rise of small investors in Korea is Meme Stock Mania In the US, anonymous users of Reddit’s Wallstreetbets forum have united to raise the prices of Gamestop Corp. and other stocks. Korean platforms such as ACT and Hey Holder require users to make sure they actually hold shares before joining a dedicated group.
ACT CEO Sangmok Lee said users on his platform often act like “fans” of the companies they own. “Fans engage in shareholder activities out of love for the company, just like how parents use training out of love,” Lee said.
A powerful alliance
The Korean stock market has been cheaper over the years than its close rivals, Japan and Taiwan, when it comes to metrics such as price-to-book ratios. While there is no single cause for “Korean discounts,” analysts point to concerns about how companies invest, a complex series of stockholdings, and the feeling that corporate executives’ profits aren’t always in line with shareholders.
Small investors aren’t enough to turn things around, but they have strong allies. Local activist funds such as Align Partners Capital Management Inc. are on the rise, adding professional knowledge to the efforts of amateur investors. Foreign funding is also taking part in the law, expanding its operations in Korea in hopes that the market is ready to ultimately turn the corner.
“We are optimistic that the presidential election will bring about even greater changes to South Korea,” said Seth Fisher, founder and chief investment officer of recent activist fund Oasis Management.Bloomberg TVInterview. He added a note of caution, saying there is still a “long, long way” to reform the Korean corporate sector.
But the biggest source of support for small investors may come from the top. In a Facebook post before his election victory, Lee Jae-Myung committed to protecting investors’ interests, promoting transparency and promoting the company to appoint directors to represent minority shareholders.
His goal? Change “Korean Discount” to “Korean Premium.”
This story was originally introduced Fortune.com