In today’s briefing:
- JAPAN BUYBACKS: A Very Big Week
- SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer
- Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔
- Last Week in Event SPACE: MitCorp, Jardine Matheson, Toshiba, Japanese Foreign Inflows
- Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation
JAPAN BUYBACKS: A Very Big Week
- This past week, nearly 150 companies in Japan announced buyback programmes totalling ¥2.1trln. 3 Tenders, 26 ToSTNeT-3 buybacks (including at least 5 delayed starts).
- The median on-market buyback was 2.40% of shares, the average 2.9% (both measured as practical maxima at announcement. Median/Average % of ADV was 7.6/9.2%.
- My prediction that this will be a record year for stock buybacks still stands.
SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer
- SBI Shinsei Bank (8303 JP) has recommended SBI Holdings (8473 JP)’s tender offer of JPY2,800 per share, a 12.6% premium to the undisturbed price (11 May).
- There is no minimum acceptance condition. SBI and irrevocables from government entities represent 73.02% of voting rights, ensuring the implementation of tender squeeze-out procedures.
- The special committee failed to unanimously recommend the offer. Minorities will feel short-changed as the outcome is predetermined and the offer tends to favour the government shareholders.
Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔
- The Nikkei Index team has been quite conscious of market impact since the April 2000 debacle. For a few years after, things were quieter. In 2005, Fast Retailing spurred introspection.
- Float was low and became lower. Selection behaviour changed. Now there is a new consultation where “technical listings” would stay in, and phased “stepwise” inclusion would reduce inclusion impact.
- The proposal increases subjectivity, reduces the attractiveness of bets, but otherwise increases the likelihood they will follow the other selection rules. It STILL does not solve the high weight problem.
Last Week in Event SPACE: MitCorp, Jardine Matheson, Toshiba, Japanese Foreign Inflows
- Mitsubishi Corp (8058 JP)‘s ¥300bn buyback means 8+% of ADV every day from here to end-Dec 2023. Buy MitCorp vs trading houses with less of a buyback impact.
- Rumours abound of an MSCI up weight for Jardine Matheson Holdings (JM SP). It wasn’t a clear-cut situation. And nothing came of it.
- There are concerns about the stability of funding for JIP’s offer for Toshiba Corp (6502 JP) in the event that Kioxia (6600 JP)’s results collapse further.
Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation
- Many companies have low valuations due to the fact that not few managers are concerned about maintaining public listing with the idea of prioritizing it over growth in shareholder interests.
- Many companies only minimally respond to formally aligning board practices with the criteria of the Corporate Governance Code, and very few are creating value through advancing their corporate governance initiatives.
- TSE data shows that OP Margin is neutral and Asset Turnover and Financial Leverage are both negative for ROE, so immediate share repurchases are the effective way in raising ROE.
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