Analysis of US activist fund Dalton Investment
“Only Korea is undervalued in the Asian stock market with a downward trend.”
“Expectations for the amendment to the Commercial Act…Opportunity for minority shareholders such as Dalton”
Are activist funds flocking in? The financial world is very tense
“Korean stocks have entered a ‘deeply discounted’ sale.”
Dalton Investment, an American activist fund, suddenly released this analysis. Dalton is an activist fund launched in 1999 when the financial crisis swept Asia. He earned handsome profits by actively investing in Asian stock markets that were devastated by the financial crisis. The reason for targeting Korean companies is the result of many undervalued stocks and the abolition of the financial investment income tax (gold investment tax). However, there are also voices of concern regarding the analysis of the American activist fund.
On the 6th, James Lim, a senior analyst at Dalton, asked, ‘Is commercial law revision next after the abolition of Korea’s gold investment tax?’ published a report. Dalton explained, “Trading volume in the Korean stock market decreased significantly in the second half of this year due to concerns about the introduction of a gold investment tax,” adding, “The Korean stock market continued its downward trend this year, recording the worst rate of return among Asian stock markets.” He said, “This is in contrast to other Asian markets, which all showed an upward trend.”
However, Dalton predicted that the Korean stock market would expand with the abolition of the gold investment tax, the amendment to the Commercial Act, and the value-up policy. Dalton explained, “Lee Jae-myung, leader of the Democratic Party of Korea, is pushing for a revision to the Commercial Act following the abolition of the gold investment tax. The purpose of the revision to the Commercial Act is to expand the duty of loyalty of directors from ‘the company’ to ‘the company and shareholders.'”
Dalton continued, “As the Democratic Party of Korea holds a majority in the Korean National Assembly, this amendment will gain strength.” He added, “Korean companies that are ‘deeply discounted’ are attractive investments to active shareholders in conjunction with these political movements.” “It will provide an opportunity,” he said. He explained, “Korea’s political actions like this are also in line with the interests of minority shareholders, including Dalton.” It is interpreted that if the commercial law amendment is passed, a positive market environment will be opened for activist funds, including Dalton.
Dalton has been Hyundai Home Shopping2020 Samyoung TradeShareholder activism has been carried out against . In 2022 SKA shareholder letter was also sent to the group requesting active shareholder return measures. Recently Kolmar KoreaThe group’s holding company Colmar Holdings It also secured a 5.02% stake.
As Dalton analyzed, the opposition party is planning to proceed with the amendment to the Commercial Act at the regular National Assembly within the year. The government is also approaching the amendment positively. Earlier this year, President Yoon Seok-yeol announced the need to process the amendment, and Financial Supervisory Service Director Lee Bok-hyun has also actively expressed his support for the amendment.
However, the concerns of the business community are significant. If the Commercial Act Amendment Bill is passed, activist funds may take issue with the ‘shareholder loyalty duty’ clause and make unreasonable demands on companies. There are also high voices of concern that lawsuits against board members will be proliferated. There is also speculation that activist funds will use the commercial law amendment as a stepping stone to excessively intervene in corporate management.
Reporter Kim Ik-hwan lovepen@hankyung.com
