Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> announced results in mid-May along with a somewhat surprising plan to "return ¥150bn to shareholders", with method to be specified later - in early June. On 7 June in the morning, Toshiba <a href="https://www.toshiba.co.jp/about/ir/en/news/20210607_1.pdf?_ga=2.28792570.77540220.1623036254-478027331.1623036254" target="_blank" rel="noopener">announced</a> how it would allocate that ¥150 billion.<div>
<ul style="list-style-type: disc;">
<li>Toshiba would pay a <a href="https://www.toshiba.co.jp/about/ir/en/news/20210607_2.pdf?_ga=2.28905850.77540220.1623036254-478027331.1623036254" target="_blank" rel="noopener">¥50 billion dividend</a> (¥110/share) to shareholders of record on 30 June 2021. Toshiba fell ¥125/share today (29 June) closing at ¥4765 as that dividend went ex-.</li>
<li>Toshiba would <a href="https://www.toshiba.co.jp/about/ir/en/news/20210607_1.pdf?_ga=2.28792570.77540220.1623036254-478027331.1623036254" target="_blank" rel="noopener">buy back</a> up to 27mm shares spending up to ¥100 billion in a buyback using ToSTNeT-3 and open-market buybacks, with the program lasting until the end of calendar 2021.</li>
</ul>
Today after the close, Toshiba announced a buyback of up to ¥100 billion to be executed via ToSTNeT-3 tomorrow morning from 8:00-8:45 JST for up to 20,986,300 shares.
<section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/978/original/Screenshot+2021-06-29+at+5.31.02+PM.png?1624959123" class="editor-image img-responsive" data-smartkarma-image-id="215978"></figure><div style="text-align: center;" class="content-caption">source: Toshiba <a href="https://www.toshiba.co.jp/about/ir/jp/news/20210629_1.pdf" target="_blank" rel="noopener">announcement</a> (Japanese)</div></section>This is not dissimilar to the explanation provided in the third ToSTNeT-3 transaction Toshiba conducted in Q4 2018. This one, is however, quite a bit smaller than that one was. 
It is worth thinking about here. While Toshiba may not intend this to be a prisoner's dilemma situation, it resembles one. 
That deserves more explanation and discussion, below.</section>
</div>

Toshiba Corp (6502 JP) announced results in mid-May along with a somewhat surprising plan to "return ¥150bn to shareholders", with method to be specified later - in early June. On 7 June in the morning, Toshiba announced how it would allocate that ¥150 billion.

Toshiba would pay a ¥50 billion dividend (¥110/share) to shareholders of record on 30 June 2021. Toshiba fell ¥125/share today (29 June) closing at ¥4765 as that dividend went ex-.
Toshiba would buy back up to 27mm shares spending up to ¥100 billion in a buyback using ToSTNeT-3 and open-market buybacks, with the program lasting until the end of calendar 2021.

Today after the close, Toshiba announced a buyback of up to ¥100 billion to be executed via ToSTNeT-3 tomorrow morning from 8:00-8:45 JST for up to 20,986,300 shares.
source: Toshiba announcement (Japanese)This is not dissimilar to the explanation provided in the third ToSTNeT-3 transaction Toshiba conducted in Q4 2018. This one, is however, quite a bit smaller than that one was. 
It is worth thinking about here. While Toshiba may not intend this to be a prisoner's dilemma situation, it resembles one. 
That deserves more explanation and discussion, below.


Toshiba ToSTNeT-3 Buyback For All The Marbles, and 🐓s

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

On Friday Toshiba’s AGM ended with both Chairman Nagayama and audit committee member Kobayashi rejected by shareholders. The result is notable for its potential corporate governance impact in Japan but its impact on Toshiba and the prospects for activists in Japan are a lot more mixed in our view.

On Friday Toshiba’s AGM ended with both Chairman Nagayama and audit committee member Kobayashi rejected by shareholders. The result is notable for its potential corporate governance impact in Japan but its impact on Toshiba and the prospects for activists in Japan are a lot more mixed in our view.

<a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> held its AGM today. It did not turn out well for the home team. As discussed in <a href="https://www.smartkarma.com/insights/with-directors-under-fire-toshiba-axes-two-may-need-another-egm" target="_blank" data-smartkarma-citation="insights:52998" rel="noopener">With Directors Under Fire, Toshiba Axes Two, May Need Another EGM</a>, after the Independent Investigative Report concluded that indeed the 2020 AGM had been conducted unfairly, and anyone with a brain could see that a) members of Toshiba's senior executive team had been trying to abuse and disenfranchise certain large shareholders, b) METI officials were helping them, and c) the Audit Committee arranged an internal investigation conducted by a law firm which appeared more interested in papering over the problem than clarifying it, things went downhill. Shareholder proxy firms ISS and Glass Lewis immediately came out recommending shareholders vote against FIVE of the members of the Toshiba-nominated slate of director candidates, including two named in the report (OTA Junji and YAMAUCHI Takashi), the Chairman of the Board (NAGAYAMA Osamu), another member of the Audit Committee (KOBAYASHI Nobuyuki), and a member of the Nomination Committee (WEISSMAN Ayako). The second largest shareholder wrote a letter to the Board, delivered on the day they held an emergency meeting to discuss the Investigative Report. That letter demanded the immediate resignation of four of those five (all except WEISSMAN Ayako). The Board responded by saying the two named in the report would not stand for re-election, that two executives would resign, and that to replace the two departing directors (former CEO KURUMATANI Nobuaki had been replaced by interim CEO TSUNAKAWA Satoshi, but FURUTA Yuki and former INED-but-not-really FUJIMORI Yoshiaki were leaving) and the two newly-leaving, one internal and three external directors would replace them, leaving the firm with 2 internals (including the CEO) and 9 external directors. Shareholders seemed unhappy at the somewhat cavalier attitude displayed by the Chairman in his remarks the next day and open letter days afterward, and more upset at the frankly dismissive attitude of the Minister for Economy Trade and Industry, KAJIYAMA Hiroshi, who first said the report was lies, then said "so what if we did?" then said, in response to the report's claim of "likely illegal actions", "we don't need to investigate."METI Head KAJIYAMA painted the tape with commentary all week, a former US ambassador to Japan came out with a letter of support for Chairman NAGAYAMA, and it turns out to be for nought.At today's AGM, Chairperson NAGAYAMA Osamu and former Audit Committee member KOBAYASHI Nobuyuki were voted out, effectively ridding the firm of the four that 3D Investment Partners wanted out. The Board was ready to sit with 9 rather than 11, and a hastily-convened meeting today was set to choose a new chairperson, who is now CEO TSUNAKAWA.But one of the newcomers George OLCOTT, nominated and approved by the AGM, has declined to take up his seat on the Board. The Board is down to eight. The acting CEO TSUNAKAWA who is, based on the open letter by previous chairman NAGAYAMA, there while a search for his replacement is conducted, is now also Chairman of the Board when independence, outsidership, and expertise are clearly needed. The Board can probably limp along this way, but this is a clear win for Effissimo and 3D and shareholders who have been upset by a clear 'tone at the top' problem under former CEO KURUMATANI, his pressure on the board and executives, messy dealings with METI, and what many view as half-hearted efforts to clean things up.

Toshiba Corp (6502 JP) held its AGM today. It did not turn out well for the home team. As discussed in With Directors Under Fire, Toshiba Axes Two, May Need Another EGM, after the Independent Investigative Report concluded that indeed the 2020 AGM had been conducted unfairly, and anyone with a brain could see that a) members of Toshiba's senior executive team had been trying to abuse and disenfranchise certain large shareholders, b) METI officials were helping them, and c) the Audit Committee arranged an internal investigation conducted by a law firm which appeared more interested in papering over the problem than clarifying it, things went downhill. Shareholder proxy firms ISS and Glass Lewis immediately came out recommending shareholders vote against FIVE of the members of the Toshiba-nominated slate of director candidates, including two named in the report (OTA Junji and YAMAUCHI Takashi), the Chairman of the Board (NAGAYAMA Osamu), another member of the Audit Committee (KOBAYASHI Nobuyuki), and a member of the Nomination Committee (WEISSMAN Ayako). The second largest shareholder wrote a letter to the Board, delivered on the day they held an emergency meeting to discuss the Investigative Report. That letter demanded the immediate resignation of four of those five (all except WEISSMAN Ayako). The Board responded by saying the two named in the report would not stand for re-election, that two executives would resign, and that to replace the two departing directors (former CEO KURUMATANI Nobuaki had been replaced by interim CEO TSUNAKAWA Satoshi, but FURUTA Yuki and former INED-but-not-really FUJIMORI Yoshiaki were leaving) and the two newly-leaving, one internal and three external directors would replace them, leaving the firm with 2 internals (including the CEO) and 9 external directors. Shareholders seemed unhappy at the somewhat cavalier attitude displayed by the Chairman in his remarks the next day and open letter days afterward, and more upset at the frankly dismissive attitude of the Minister for Economy Trade and Industry, KAJIYAMA Hiroshi, who first said the report was lies, then said "so what if we did?" then said, in response to the report's claim of "likely illegal actions", "we don't need to investigate."METI Head KAJIYAMA painted the tape with commentary all week, a former US ambassador to Japan came out with a letter of support for Chairman NAGAYAMA, and it turns out to be for nought.At today's AGM, Chairperson NAGAYAMA Osamu and former Audit Committee member KOBAYASHI Nobuyuki were voted out, effectively ridding the firm of the four that 3D Investment Partners wanted out. The Board was ready to sit with 9 rather than 11, and a hastily-convened meeting today was set to choose a new chairperson, who is now CEO TSUNAKAWA.But one of the newcomers George OLCOTT, nominated and approved by the AGM, has declined to take up his seat on the Board. The Board is down to eight. The acting CEO TSUNAKAWA who is, based on the open letter by previous chairman NAGAYAMA, there while a search for his replacement is conducted, is now also Chairman of the Board when independence, outsidership, and expertise are clearly needed. The Board can probably limp along this way, but this is a clear win for Effissimo and 3D and shareholders who have been upset by a clear 'tone at the top' problem under former CEO KURUMATANI, his pressure on the board and executives, messy dealings with METI, and what many view as half-hearted efforts to clean things up.

Toshiba Board in Disarray! Likely Need ANOTHER EGM

In January I asked the question because it pertained to how the EGM might come out.After that, we saw a TOPIX inclusion for something close to 45,000,000 shares or nearly 10% of shares outstanding. The data we had suggested the outcome below.We could pro-forma the Pension Trusts and Investment Trusts, but the swing of 9.9% had to come from somewhere. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/215/067/original/Screenshot+2021-06-24+at+5.23.23+PM.png?1624526759" class="editor-image img-responsive" data-smartkarma-image-id="215067"></figure></section>And that was important because it meant we could figure out who had the voting rights for tomorrow's AGM. <div class="content-highlight">Today we know who sold. </div>And that may give you something of an idea of how the AGM might go (and as I noted back in January, Toshiba's management and board was likely to know that voting split a couple of months ahead of you). More below the fold.<hr>Recent insights into the Toshiba situation include the following:<ul>
<li><a href="https://www.smartkarma.com/insights/toshiba-the-king-is-dead-long-live-the-king" target="_blank" data-smartkarma-citation="insights:50309" rel="noopener">Toshiba - The King Is Dead, Long Live the King</a></li>
<li><a href="https://www.smartkarma.com/insights/how-much-of-toshiba-is-owned-by-activists" target="_blank" data-smartkarma-citation="insights:50462" rel="noopener">How Much of Toshiba Is Owned By "Activists"?</a> </li>
<li><a href="https://www.smartkarma.com/insights/toshiba-results-shareholder-return-possibly-big-impact-buyback-coming" target="_blank" data-smartkarma-citation="insights:51517" rel="noopener">Toshiba Results &amp; Shareholder Return - Possibly Big Impact Buyback Coming</a> </li>
<li><a href="https://www.smartkarma.com/insights/toshiba-shareholder-return-a-little-of-this-a-little-of-that-but-sticky-and-accretive" target="_blank" data-smartkarma-citation="insights:52637" rel="noopener">Toshiba Shareholder Return - A Little of This, A Little of That, But Sticky and Accretive</a> </li>
<li><a href="https://www.smartkarma.com/insights/toshiba-s-2020-agm-investigative-report-is-damning" target="_blank" data-smartkarma-citation="insights:52868" rel="noopener">Toshiba's 2020 AGM Investigative Report Is Damning</a> </li>
<li><a href="https://www.smartkarma.com/insights/with-directors-under-fire-toshiba-axes-two-may-need-another-egm" target="_blank" data-smartkarma-citation="insights:52998" rel="noopener">With Directors Under Fire, Toshiba Axes Two, May Need Another EGM</a></li>
</ul>

In January I asked the question because it pertained to how the EGM might come out.After that, we saw a TOPIX inclusion for something close to 45,000,000 shares or nearly 10% of shares outstanding. The data we had suggested the outcome below.We could pro-forma the Pension Trusts and Investment Trusts, but the swing of 9.9% had to come from somewhere. And that was important because it meant we could figure out who had the voting rights for tomorrow's AGM. Today we know who sold. And that may give you something of an idea of how the AGM might go (and as I noted back in January, Toshiba's management and board was likely to know that voting split a couple of months ahead of you). More below the fold.Recent insights into the Toshiba situation include the following:
Toshiba - The King Is Dead, Long Live the King
How Much of Toshiba Is Owned By "Activists"? 
Toshiba Results &amp; Shareholder Return - Possibly Big Impact Buyback Coming 
Toshiba Shareholder Return - A Little of This, A Little of That, But Sticky and Accretive 
Toshiba's 2020 AGM Investigative Report Is Damning 
With Directors Under Fire, Toshiba Axes Two, May Need Another EGM


How Much of Toshiba Is Owned By "Activists"? The Answer

Yesterday Toshiba disclosed the reports by its Audit Committee and the “third party” law firm, Nishimura &amp; Asahi. The contrast between the quality of work of the independent investigators selected by Effissimo and that of Nishimura &amp; Asahi is stark.

Yesterday Toshiba disclosed the reports by its Audit Committee and the “third party” law firm, Nishimura &amp; Asahi. The contrast between the quality of work of the independent investigators selected by Effissimo and that of Nishimura &amp; Asahi is stark.

Toshiba – A Tale of Two Investigative Reports

Japan

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

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Toshiba Corp (6502 JP)

Toshiba ToSTNeT-3 Buyback For All The Marbles, and 🐓s

Toshiba has launched a ToSTNeT-3 buyback tomorrow morning for the entire size of its planned buyback. If it gets the stock, that's it. If not, it...

Travis Lundy

Toshiba – The Fallout

The result of Toshiba's AGM is notable for its potential corporate governance impact in Japan but its impact on Toshiba and the prospects for...

Mio Kato

Toshiba Board in Disarray! Likely Need ANOTHER EGM

Toshiba's AGM ended in "disaster" as shareholders voted out the chair and a former audit committee member. Then one new electee declined his...

Travis Lundy

How Much of Toshiba Is Owned By "Activists"? The Answer

There has been a question of how much of Toshiba is owned by Active Foreign Investors. That is now largely answered. Their stake is down a quarter...

Travis Lundy

Toshiba – A Tale of Two Investigative Reports

The contrast between the quality of work of the independent investigators selected by Effissimo and that of Nishimura & Asahi is stark and...

Mio Kato

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