Strategic Capital, the Tokyo investment manager, told regulators on 6 October that it is pressing GungHo Online Entertainment on capital structure, ownership and the board, and its list runs well beyond a single buyout demand. Its stake is unchanged at 13.67%, the same as in its previous report, so the amended item is the stated purpose of the holding, not its size.
Tokyo Brief reported on 27 August that the investor had told GungHo to remove its representative director or chairman, or find a buyer. The change report, numbered 11 and filed with the Kanto Local Finance Bureau, spells out the proposals in detail. It gives the reason for filing as a change of holding purpose, and the reporting obligation arose on 29 September. Holders of more than 5% of a listed company file such reports, which disclose among other things why they hold.
What Strategic Capital proposes
The stated purpose is to raise shareholder value through constructive dialogue and important proposals to GungHo, alongside pure investment. The report lists these proposals:
- Capital policy. Improve the capital structure by using interest-bearing debt and curbing shareholders' equity; acquire treasury shares from specific shareholders, meaning one individual and holders Strategic Capital judges he substantially controls; and dispose of the shares so acquired to Sony Music Entertainment.
- Ownership. Delist GungHo through acquisition by a third party.
- Payout. Raise the dividend.
- Board, if GungHo stays listed. Either dismiss the representative director or have the chairman leave the board. The report presents these as alternatives.
These are the filer's proposals, not agreed transactions. The report gives no buyer for the buyout, and no amount for the buyback or the dividend increase.
The stake and how it is held
Strategic Capital reports 7,267,500 shares against 53,161,416 shares outstanding as of 29 September, which produces the 13.67% figure. The report names one filer and no joint holders. Its table of acquisitions and disposals in the past 60 days is empty.
The report says 7,267,400 of those shares are held as customer assets under a discretionary investment contract with Intertrust Trustees (Cayman) Limited. Of those, 800,000 shares are pledged to Tachibana Securities as substitute collateral, and 500,000 are lent to Tachibana Securities under a stock-lending agreement.
The funding disclosure shows own funds of ¥275,000. The remainder of the ¥20.84bn total came from customer assets under the discretionary contract, including ¥4.01bn in margin trading through Tachibana Securities, and the report lists no borrowings.