Domestic activist fund Align Partners has begun preparations ahead of next year's shareholders meeting. Align Partners changed the purpose of its equity holdings in previously invested listed companies en masse from "general investment" to "influence over management." It signals that the firm is expected to engage in more active shareholder activities going forward.
According to electronic disclosures by the Financial Supervisory Service on the 30th, Align Partners disclosed on the 28th that the number of shares held and the purpose of holdings had changed for Dentium and SOLUM, listed on the Korea Exchange main board, and for Gabia, listed on KOSDAQ.
Specifically, Align Partners increased its equity stake in Gabia from 8.04% to 9.03%. Its Dentium equity also rose from 7.17% to 8.16%. The SOLUM stake remained at 8.04%.
Notably, the change in the purpose of the shareholdings stands out. Align Partners changed its previous "general investment" purpose to "influence over management." Among equity holding purposes, general investment refers to an investment style that exercises voting rights, rights to subscribe to new shares, and other shareholder activities without affecting management control. In contrast, influence over management is closer to a declaration of intent to intervene actively in corporate management.
In the disclosure, Align Partners said, "Align Partners can exert direct or indirect influence on the company in relation to the Enforcement Decree of the Financial Investment Services and Capital Markets Act," adding, "Considering the interests of the company's shareholders and stakeholders, we will decide related actions in a manner consistent with the company's management objectives, within the scope and methods permitted by applicable laws and regulations."
The enforcement decree specified here includes ▲ the appointment, dismissal, or suspension of duties of executives ▲ amendments to the company's articles of incorporation under the Commercial Act ▲ mergers, partitioning, and split-mergers of the company ▲ comprehensive exchange and transfer of shares, among others. However, it added, "There is an intention to take actions for the purpose of influencing management in the future, but no specific plans have been established to date."
Lee Chang-hwan, head of Align Partners, told ChosunBiz that "nothing specific has been finalized yet," but explained the decision by noting that "the regular shareholders meeting next year is not far off."
Listed companies in which Align Partners holds equity appear on edge. In particular, SOLUM, which is already in conflict with minority shareholders, could face greater pressure if Align Partners, the second-largest shareholder, embarks on shareholder activism for the purpose of influencing management. SOLUM has been in ongoing conflict with minority shareholders over suspected related-party transactions by the owner family and controversy surrounding the issuance of redeemable convertible preferred shares (RCPS).
Shareholder activism could also occur at Dentium and Gabia. That is because the activist fund holds the next-largest equity after the largest shareholder.
Align Partners became the second-largest shareholder of Dentium this year through on-exchange purchases. The largest shareholder is founder Jeong Seong-min, whose equity, combined with that of related parties, amounts to only 18.95%.
In Gabia's case, the second-largest shareholder is the foreign activist fund Millie Capital. As of Sept. 30, Millie Capital held an 18.31% stake. If Align Partners joins forces with Millie Capital, they could surpass the equity stake (25.79%) held by founder Kim Hong-guk, the largest shareholder, and related parties.
A Gabia official said, "We view major shareholders, including activist funds, as important management partners rather than as parties to a dispute," adding, "If constructive opinions are presented, we will consider them positively."
Meanwhile, some advise caution, noting that the emergence of activist funds can cause sharp swings in stock prices. In SOLUM's case, after news that Align Partners had secured equity, the stock jumped 16% on Sept. 5 but later gave back the gains. Dentium also surged 11% on Apr. 1 but returned to its original price within five trading days.