Activist fund Align Partners Asset Management moved to block a discretionary disposal of treasury shares by STIC Investments, a domestic private equity fund (PEF) manager. Align recently changed its purpose for holding STIC Investments shares from "simple investment" to "influencing management control," signaling an aggressive campaign.
In a statement distributed on the 5th, Align said, "A discretionary third-party disposal of treasury shares carried out solely by a board resolution without considering the protection of all shareholders' interests could be interpreted as a breach of directors' duty of loyalty under the amended Commercial Act," and stated accordingly.
STIC Investments holds treasury shares amounting to 13% of its total shares outstanding. On the 3rd, it suggested the possibility of a disposal in a filing, saying it is "reviewing various plans to secure growth drivers for the company by utilizing treasury shares."
Align, the third-largest shareholder with 7.63% equity in STIC Investments, said, "Multiple shareholders have long been requesting the company to cancel its treasury shares, and as the National Assembly and authorities are working to prevent the abuse of treasury shares to strengthen controlling shareholders' dominance, it is inappropriate and regrettable that STIC Investments, which is itself an investment company, made such a disclosure."
Align explained that it has continuously requested through private discussions with STIC Investments the full cancellation of treasury shares except those intended for employee compensation. It added that it has repeatedly emphasized that treasury shares should not be used in ways that dilute shareholder value or distort governance, such as third-party exchange or disposal.
Align pointed out that if STIC Investments is reviewing a disposal of treasury shares to raise funds for mergers and acquisitions (M&A), alternatives include using cash on hand, borrowing, or a paid-in capital increase. It emphasized that canceling treasury shares first and reviewing other alternatives as a priority, and, if deemed unavoidable, carrying out a paid-in capital increase would be more beneficial for the company and all shareholders.
Align said that if STIC Investments arbitrarily disposes of treasury shares, it could be interpreted as an attempt to evade the application of the third amendment to the Commercial Act, which mandates the cancellation of treasury shares. The National Assembly is currently discussing passing within the year the third amendment to the Commercial Act, which includes "mandatory cancellation of treasury shares," to improve the treasury share system.
At the same time, Align demanded that STIC Investments publicly disclose by the 14th a board-level confirmation that it is not considering a discretionary disposal of treasury shares, shareholder value enhancement plans including specific plans for disposal and cancellation of treasury shares, and the board's review results on these matters.