Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

With Directors Under Fire, Toshiba Axes Two, May Need Another EGM

TSE Prime: Japan's Corporate Governance Code Finalized So Boxes Will Be Furiously Ticked

How Much of Toshiba Is Owned By "Activists"?

Toshiba - The King Is Dead, Long Live the King

Gravity Works As WeWork Doesn't; Now Plan B

Quiddity Advisors

Event-Driven

<p>After the Extraordinary General Meeting of 18 March, 2021, <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 that the measure to investigate the "status of the operations and property of the stock company" was passed in its original form. </p>
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<p>The resolution was designed to have a team of investigators investigate <em>"Any matters the Investigators deem necessary in relation to whether the Annual General Meeting of Shareholders for the 181st fiscal year of the Company held on July 31, 2020 was conducted in a fair and impartial manner (including the lawfulness and fairness of the resolutions thereat)"</em></p>
<p>There had been accusations of inappropriate count, inappropriate attempt to influence shareholders, etc. Different shareholders could accuse Toshiba of various matters in the public domain, but it would not be part of the official Toshiba record unless it was "official."</p>
<p>Today, that report dropped. Like a brick. </p>
<p>With regard to the exercise of shareholder proposal right, which was NOT supposed to be affected  by the change in the Forex Exchange Act, which was "not a law to exclude activists" and was meant to restrict shareholder rights solely on the basis of "acts that may damage national security or lead to the damage of national security."</p>
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<p>In this Investigation, it was suspected that Toshiba had improperly worked against Effissimo regarding the exercise of its shareholder proposal right. In other words, in this Investigation, the Investigators found materials that suggest that the interests of the Toshiba management and the Ministry of Economy, Trade and Industry (especially the Commerce and Information Policy Bureau) coincided. Toshiba management expected that the Revised FEA would enable them to take measures to counter activists, and METI stated that the disruption of Toshiba's management due to a proxy fight during the COVID-19 pandemic was a policy concern from the perspective of corporate management stability and employment maintenance. The two parties worked closely together to prevent Effissimo, which had raised compliance issues related to the TSC accounting fraud problem and hinted at the possibility of making a shareholder proposal, from exercising its shareholder proposal at the AGM, and then schemed to cause Effissimo to withdraw it.</p>
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<p>The investigation finds that Toshiba worked with METI's assistance and involvement to get Effissimo to withdraw its shareholder proposal for new directors. There appears to have been a very explicit "Good Cop, Bad Cop" negotiating method (described quite clearly on <a href="https://www.toshiba.co.jp/about/ir/en/news/20210610_1.pdf" target="_blank" rel="noopener">p114</a>) and a joint effort with regulators to find ways to trip up Effissimo to try to force them to withdraw their proposal. </p>
<p>The conclusion in that regard notes...</p>
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<p>As described above, the series of moves by Toshiba to have Effissimo's shareholder proposal withdrawn, so to speak in unison with the Commerce and Information Policy Bureau Route [sic], include acts suspected to be against laws, etc. throughout, can be evaluated as an attempt to unfairly restrict the exercise of the shareholder proposal right, at least for the purpose of deviating from the purpose of the Revised FEA....  and... it can be said that Toshiba's actions directly or indirectly had an undue influence on shareholders with the intention of effectively interfering with the exercise of shareholders' rights at this AGM. Therefore, we believe that this AGM was not fairly managed."</p>
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<p>That is but one example. This is going to cause problems at both the level of Toshiba and METI, possibly even the PM's office. </p>
<p>The conversations in the elevator this afternoon must be something.</p>
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After the Extraordinary General Meeting of 18 March, 2021, Toshiba Corp (6502 JP) announced that the measure to investigate the "status of the operations and property of the stock company" was passed in its original form. 



The resolution was designed to have a team of investigators investigate "Any matters the Investigators deem necessary in relation to whether the Annual General Meeting of Shareholders for the 181st fiscal year of the Company held on July 31, 2020 was conducted in a fair and impartial manner (including the lawfulness and fairness of the resolutions thereat)"
There had been accusations of inappropriate count, inappropriate attempt to influence shareholders, etc. Different shareholders could accuse Toshiba of various matters in the public domain, but it would not be part of the official Toshiba record unless it was "official."
Today, that report dropped. Like a brick. 
With regard to the exercise of shareholder proposal right, which was NOT supposed to be affected  by the change in the Forex Exchange Act, which was "not a law to exclude activists" and was meant to restrict shareholder rights solely on the basis of "acts that may damage national security or lead to the damage of national security."




In this Investigation, it was suspected that Toshiba had improperly worked against Effissimo regarding the exercise of its shareholder proposal right. In other words, in this Investigation, the Investigators found materials that suggest that the interests of the Toshiba management and the Ministry of Economy, Trade and Industry (especially the Commerce and Information Policy Bureau) coincided. Toshiba management expected that the Revised FEA would enable them to take measures to counter activists, and METI stated that the disruption of Toshiba's management due to a proxy fight during the COVID-19 pandemic was a policy concern from the perspective of corporate management stability and employment maintenance. The two parties worked closely together to prevent Effissimo, which had raised compliance issues related to the TSC accounting fraud problem and hinted at the possibility of making a shareholder proposal, from exercising its shareholder proposal at the AGM, and then schemed to cause Effissimo to withdraw it.




The investigation finds that Toshiba worked with METI's assistance and involvement to get Effissimo to withdraw its shareholder proposal for new directors. There appears to have been a very explicit "Good Cop, Bad Cop" negotiating method (described quite clearly on p114) and a joint effort with regulators to find ways to trip up Effissimo to try to force them to withdraw their proposal. 
The conclusion in that regard notes...


As described above, the series of moves by Toshiba to have Effissimo's shareholder proposal withdrawn, so to speak in unison with the Commerce and Information Policy Bureau Route [sic], include acts suspected to be against laws, etc. throughout, can be evaluated as an attempt to unfairly restrict the exercise of the shareholder proposal right, at least for the purpose of deviating from the purpose of the Revised FEA....  and... it can be said that Toshiba's actions directly or indirectly had an undue influence on shareholders with the intention of effectively interfering with the exercise of shareholders' rights at this AGM. Therefore, we believe that this AGM was not fairly managed."


That is but one example. This is going to cause problems at both the level of Toshiba and METI, possibly even the PM's office. 
The conversations in the elevator this afternoon must be something.




Toshiba's 2020 AGM Investigative Report Is Damning