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

'Model AA' Shares - Good Governance Gone Bad?

Thematic (Sector/Industry)

Japan Consumer discretionary / Thematic (Sector/Industry)

Toyota completed the sale of the first tranche of its Model AA Shares this week, selling 47.1mm AA-shares for 499.1658bn yen, a price of JPY 10,598 per share.After <a href="http://www.smartkarma.com/insights/model-aa-shares-good-governance-gone-bad" target="_blank">urging</a> Toyota shareholders to understand the problems with the issuance then belaboring that deceased equine a few more times, Toyota shareholders up and agreed anyway. But the issuance was the least well-supported of any shareholder voting item at any Toyota shareholder meeting since, well... forever.At dinner in Tokyo around the time of the shareholder vote, a well-known market strategist and fund manager friend of mine said "The reason why we don't like these Model AA Shares is that we can't buy them." I disagreed.The reason why I don't like them was that, after years of Toyota doing roughly the right thing from a capital management perspective (paying back excess capital through higher dividends and share buybacks) the managers and board of Toyota did something which was unfair and economically illogical IN ORDER TO BUY VOTES. There were internal inconsistencies in almost every part of TMC's reasoning, and the share issuance was economically inferior to the obvious alternative - inferior in EVERY possible term of a potential issuance. This should make every Toyota shareholder think twice about how much management and the board are really working for you the existing shareholder. A priori, it was a bad economic decision to issue the shares. For those who needed to see me 'moon' an "a posteriori" accounting proof, it is below. Read further for the ΟΕΔ.

Toyota completed the sale of the first tranche of its Model AA Shares this week, selling 47.1mm AA-shares for 499.1658bn yen, a price of JPY 10,598 per share.After urging Toyota shareholders to understand the problems with the issuance then belaboring that deceased equine a few more times, Toyota shareholders up and agreed anyway. But the issuance was the least well-supported of any shareholder voting item at any Toyota shareholder meeting since, well... forever.At dinner in Tokyo around the time of the shareholder vote, a well-known market strategist and fund manager friend of mine said "The reason why we don't like these Model AA Shares is that we can't buy them." I disagreed.The reason why I don't like them was that, after years of Toyota doing roughly the right thing from a capital management perspective (paying back excess capital through higher dividends and share buybacks) the managers and board of Toyota did something which was unfair and economically illogical IN ORDER TO BUY VOTES. There were internal inconsistencies in almost every part of TMC's reasoning, and the share issuance was economically inferior to the obvious alternative - inferior in EVERY possible term of a potential issuance. This should make every Toyota shareholder think twice about how much management and the board are really working for you the existing shareholder. A priori, it was a bad economic decision to issue the shares. For those who needed to see me 'moon' an "a posteriori" accounting proof, it is below. Read further for the ΟΕΔ. 

Pan Pacific International Holdings (7532 JP)

TOYOTA AA-SHARES:  Happy Now? 6-10yrs of dividend differentials paid in fees to Nomura