"Cancel Treasury Shares and Disclose Succession Plan"...Align Sends Open Letter to STIC

Demand for Specific Measures to Be Disclosed by January 19 Next Year

Activist fund Align Partners has called on domestic private equity fund (PEF) manager STIC Investments to cancel its treasury shares and disclose its leadership succession plan.

On the 24th, Align announced that it had sent a public shareholder letter containing these demands. Align is a major shareholder of STIC Investments, holding a 6.73% stake (3,180,499 shares).

Align pointed out that STIC Investments’ current share price is excessively undervalued. In the public letter, Align stated, “Despite managing over 10 trillion won in assets primarily for institutional clients, the return on equity (ROE) as of the end of the third quarter this year remained at just about 0.3% over the past 12 months, which is not a normal level. If you subtract net financial assets of 207.3 billion won from the current market capitalization of 363 billion won, the market is valuing the company at only 155.7 billion won. This is significantly undervalued, considering the company’s past performance, investment personnel, and industry network-its intangible value.”

Align emphasized that STIC Investments needs to announce a next-generation leadership succession plan in order to enhance corporate value. In particular, Align demanded that, except for employee compensation purposes, half of the treasury shares should be used for compensating next-generation management and securing key talent, while the remaining shares should be immediately canceled to resolve governance uncertainty.

In addition, Align urged the company to: ▲expand assets under management and strengthen its earnings base by utilizing appropriate leverage at the management company level; ▲announce a medium- to long-term strategy for corporate growth and shareholder value enhancement; and ▲implement measures to improve institutional board independence and expertise.

Align also set a deadline for STIC Investments’ response. The fund specified that the company must officially announce a corporate value enhancement plan, including these measures, by January 19 next year. Previously, since becoming a shareholder in February last year, Align has held four private meetings with management and sent five private letters. However, due to a lack of progress, Align has now taken public shareholder action.

In fact, STIC Investments has consistently refused the demand to cancel its treasury shares. However, on the 21st, the company disclosed that it would introduce a restricted stock unit (RSU) system to provide treasury shares as compensation to employees. Under this system, shares are pre-committed, and employees receive them if they meet certain tenure and performance conditions. Of the 5,633,228 treasury shares held (representing a 13.5% stake), about 1.25 million shares, or roughly 22%, will be granted as RSUs.

Meanwhile, STIC Investments’ governance structure is currently tilted in favor of the activist camp. The founding chairman, Doh Yonghwan, and his affiliates hold a 19.04% stake-Doh Yonghwan himself holds 13.46%, and Vice Chairman Kwak Donggeol holds 3.77%. In addition, Doh’s two sons and partner-level executives, considered special affiliates, hold a combined 1.81% stake.

On the other hand, the activist camp is led by U.S.-based Millie Capital, which holds a 13.48% stake. Align Partners also increased its stake from 6.64% to 7.63% through open-market purchases last month. Additionally, domestic Petra Asset Management holds a 5.09% stake. Altogether, the activist group’s combined stake amounts to 26.20%.

This content was produced with the assistance of AI translation services.