5 years later most listed stocks in Japan STILL trade below book value. more than 1000 companies need to be delisted. *Not giving investment advice.
Joined March 2023
- Tweets3.4K
- Following888
- Followers8.4K
- Likes9.5K
Pinned Tweet
I've been thinking a lot recently about what narratives could modify the euphoric investing landscape to a more moderate or even bearish one.
Simply put I think it goes like this:
Narrative 1: "We cant spend this much anymore"
collides with
Narrative 2: "They wont let us spend this much anymore"
1 is a markets narrative, 2 is a political narrative
welcome to Japain Kioxia holders.... hoping to finally get some relief with Hynix up 8%... Kioxia just turned negative.
adding this one, its too incredible not to
xitter.cf/Ingathewinger/status/2…
There have been a few posts and replies on this company already but I think, given the absurdity of the situation, its worth its own post, especially given the recent filings. The company is Hi-Lex 7279.T. Yesterday, the founding family upped its position from 25.7% to 27.3% (they now control a total of 35% of the vote, through joint filings). @TeddyOkuyama has a nice post about this company already.
Hi Lex is trading at 30% of its tangible book! They have 54bn yen of redundant (and liquid) cross shareholdings (100% of its mkt cap). 35bn yen of net cash (64% of its mkt cap). 9bn yen of receivables and 64bn yen (120% of mkt cap) of property and other assets.
Last year, the company published this "defense from TOB" document. hi-lex.co.jp/wp-content/uplo…. Within this anti-capitalist tirade, management ironically talk about corporate governance and free markets....I have no idea what motivated them to publish this, given there has not been a public activist campaign since 2007, when Steel Partners recognized the deep value opportunity here. warrenlichtenstein.com/media…
Interestingly, the company meets all of the requirements to move up from TSE Standard to TSE Prime, which would result in something like 50 days of volume of passive buying. In theory they should love the idea of this, given that the stock is so illiquid, higher passive ownership would serve as an even stronger barrier to potential activism. So why are they not applying? My view is that they don't want to be on a TSE "name and shame" list of companies trading below book value...and feel like hiding out on TSE standard will help them fly under the radar.
From these insider share purchase filings yesterday, one can assume that the family is either trying to secure even more voting control to block a potential activist campaign, or in preparation for some sort of family buy out (so they don't have to deal with the TSE "bullying" anymore). Buying out this company anywhere near where it is trading now, would be a form of robbery against minority investors, as its liquid securities and cash alone are significantly higher than the market cap here.
This situation is somewhat of a microcosm for the governance problems Japan has faced for the better part of 3 decades now. I'm not sure there is any opportunity here. It appears like this TOB defense and insider buying is more of a battle against TSE governance reforms, and the "name and shame" campaign (they plan to launch on Monday), more so than any specific activist campaign. It would be unfortunate, if this goes the way of 4987, Teraoka Seisakusho-- where ultimately management was able to rob minority investors and take the company private 50% below book value.
someone please explain to the TSE that their reforms have failed to fix valuation/share price.
Hi Lex has done everything right. Conscious of capital, improving ROE (23%!), selling non core assets (1,240 12m EPS or 1.8x P/E) and yet the market is eternally bearish and assigns this 2.8x EV/EBTIDA and 0.38x book
if you are the family that owns this company why are you letting this awful pool of investors embarrass you, year after year. there is nothing more you can do other than steal this from minority investors. there is enough net cash do it w/o any debt burden.
Japan Deep Value retweeted
We are long the “Toshiba Three”: Rohm (6963 JP), Chubu Electric (9502 JP) and TRE (9247 JP), all of which hold hidden stakes in the Toshiba buyout on their balance sheet that could be worth 80-96% of their current market cap. Presentation/disclaimer at blueorcacapital.com
There is very little investment case for minority investing in Japan equities at the moment. Outside of shareholder activism and M&A related delisting, its really hard to see any upside anymore
Global stock markets have long enjoyed a major tailwind from companies that choose to go private, and that in the process, offer shareholders a premium to do so.
However, this dynamic largely did not exist in Japan - until recently.
2026 is on track to be the third record year in a row for stock de-listings in Japan.
The number of public companies in the US has roughly halved since the year 2000. In Japan, total listings only started to fall from 2025.
This trend has a long way to run as there are many public companies in Japan that are far better suited to private equity or other private ownership due to small scale, illiquidity, lack of a coherent growth strategy, and poor capital management.
Investors in Japan should benefit from an ongoing tailwind as a growing number of companies continue to go private at strong premiums.
These guys did everything right and still can’t get the nod from TPX. I wonder when management just gives up and realizes they can’t steal this from minorities for a 30% premium to last
This bear post might seem incorrect with nikkei and ai rallying again but look no further than the results of the new topix index with only 35 adds and 684 deletes. jpx.co.jp/english/news/6030/… to see why I’m maintaining this stance. Even companies that have significantly improved their governance/returns/ earnings still won’t qualify to stay in topix. The future is delisting (at higher prices)
so event funds are really blown out of all their global equity positions because of rates... feel like they could have done a better job managing/hedging their int. rate risk and leverage around tight spreads.. jeez
Japan Deep Value retweeted
I just finished reading the full court decision in this poison pill injunction case (3D Investment Partners v Toho HD). It makes for very interesting reading and is major victory for shareholders.
That said, there are some limits to its broader application due to the facts of the case. The court is also a first-instance court, so we need to see what happens when the company appeals.
The biggest question the case raises to my mind, is whether all non-emergency takeover defence measures can be enjoined if there is no intention on the part of the acquiror to take control of the company? (provided of course that the shareholder is engaging appropriately with the company).
Or, will a court take the view that the shareholder began acquiring knowing the measures were in place, therefore cannot seek to have them set aside after the fact?
Key quotes from the decision (machine translated):
"at least in this case, it is not appropriate to conclude that the common interests of shareholders have been harmed by the acquisition of debtor shares by creditors, etc., based solely on a resolution of the shareholders' meeting."
[based on the reasoning that because the acquiror had promised not to acquire more than 27% control was not involved. The company needed to show shareholder interests risked actual harm, it was not enough that shareholders approved the defence measures. For similar reasons, the acquisition was not "coercive" in nature]
The company claimed 3D's requests and suggestions regarding its management harm the common interests of shareholders:
The court said that 3D's proposals were quite:
"ordinary proposals from institutional investors seeking to improve capital efficiency, and cannot be considered to be aimed at pursuing their own interests at the expense of the common interests of shareholders, nor can the other proposals themselves be said to be unreasonable."
The court also looked at 3D's behaviour in the Fuji Soft deal, determining that it did not act in a way where its interests were different to other shareholders, so there was no evidence of past behaviour showing detriment to the common interests of shareholders.
This could distinguish 3D's record from that of other activists, where the activists have previously participated as LP's in take-private transactions where they have a significant public shareholding. This could be viewed as the activists having different interests in the transaction vs those of the other shareholders.
For the first time in Japan a Tokyo court has upheld an activist’s request for a (provisional) injunction against the implementation of a takeover defence measure that was approved by a vote of the target company’s shareholders.
This is a major win for 3D Investment Partners over the management of the company in which it has invested – Toho HD.
Underperforming management teams in Japan often seek to use takeover defence measures to entrench themselves by preventing economically-minded shareholders from gaining too much voting influence and thus effecting managerial change.
As the full judgment is not yet available, we do not know whether the reasoning used will have broader ramifications or be limited in its scope. Additionally, the judgment was delivered by a court of first instance, and the company has stated it will appeal the decision.
Despite this, the judgment could be so important that it is worthwhile discussing in detail - see my full write up at the link in the comments.
Japan Deep Value retweeted
The Internet Needs Crypto to Survive AI: youtube.com/watch?v=TKVY4hVA…
One of the most exciting, and underrated, developments in crypto atm revolves around this @Bankless conversation with @eastdakota of @Cloudflare.
~20% of all websites are routed through Cloudflare, and in this conversation Matthew tells us that the business model of the Web is under attack. To put it simply, agentic traffic is exploding, and agents don't click on ads, but ads underpin much of the "free" stuff we get online. The infrastructure is creaking under agent load.
Matthew's assertion is that microtransactions, at a scale not previously seen, will be needed to pay for access to content, as the advertising model of the Web falls apart with agents. Crypto people have talked about microtransactions forever, but it was for people, which never worked, whereas we're now contemplating it for agents.
He says Cloudflare handles ~500M requests per second, and that 1-10% of those requests may be suitable for this microtransaction model. A blockchain environment is the only payment network that could theoretically handle this scale, and it would need to hit 5-50M TPS.
5-50M TPS in prod dwarfs anything yet attempted in crypto, and is far beyond anything TradFi can handle. There are very few blockchain environments that could conceivably provide this throughput.
Just as important as the scale, is the model and trust assumptions. While Cloudflare may roll this out as a solution for its customers first, what's implicit here is the potential for an entirely new business model for the Web.
If Cloudflare walks this path, I hope that what they build has permissionless validation, allowing for anyone to audit the network.
Cloudflare has been a torch bearer for the open Internet, and so it only follows that if they're to pioneer a new business model for the Web, that the architecture be an open network. Doing so will engender the most trust, goodwill, and adoption in the long run.
Web 3.0 is dead, long live Web 3.0.
Japan Deep Value retweeted
2000年代初めに横行したポイズンピル。2025年以降、PBR1倍以下の上場企業経営に対して営業熱心な製薬会社のすすめでポイズンピルは再び流行気味だった。2026年5月より「30%ルール」(原則30%以上保有して買いましたらTOB)が金商法で改正されたが、実態としてポイズンピルは経営者が好きなレベルで、嫌いだったりうるさい株主に対して買い増しを抑制するツール。これが今後抑制される。使いづらくなる。実は製薬会社は、「支配権」という言葉を使いたい。なぜかというと、「支配権」という言葉が出た瞬間、会社の「有事」となり、支配権が焦点となる中、アセマネ勢も（多分）自社の制定した議決権行使基準の範囲外となり、グラスルイスやISSなど議決権助言会社のアドバイスに頼りがち。助言会社も「支配権」（実際20%だからあんま関係ない）というロジックの中、株主を超厳しく判断する。そんな支配権言いがかりアービトラージが横行していた中、東京裁判所は、「いやいやTOBルールあるやん。支配権問題は30%からやろ」と金商法のアップデートにより製薬会社・上場企業経営に一石が投じられた形
東邦ＨＤの買収防衛策、東京地裁が差し止め reut.rs/4rrHOkk reut.rs/4rrHOkk
