NOVEL WEB 28
“The results of the Seongnam Branch audit are in.”
A week later, at Yuseong Investment Securities headquarters.
Jeon Seung-jae, head of the WM Support Department, stood up as the team leader approached his desk.
“I can already guess what it says.”
Jeon Seung-jae moved to the conference table in the center of the office and received the report handed to him by the team leader.
Although he had participated in the recent audit of the Seongnam Branch, they still needed to prepare a report for the higher-ups.
As Jeon Seung-jae reviewed the prepared report, he let out a derisive snort.
“Looking at it all together like this, it’s really something.”
Compared to PBs at other branches, the trading turnover rate was low.
No, even without comparing to other branches, it had significantly decreased compared to the Seongnam Branch’s average trading turnover rate from three months ago.
“If it changes this much just because one branch manager went there, it must be the branch manager’s problem, right?”
“Yes, it’s serious.”
“But you wrote the opinion section like this?”
On the last page of the report was Branch Manager Ryu Tae-hwa’s opinion on this audit.
“What? ‘Attempting to prioritize client interests with a new approach, breaking away from sales methods that disadvantage clients?’“
Jeon Seung-jae became even more heated by Ryu Tae-hwa’s behavior, which seemed to point out problems with the existing system without showing any remorse for the drop in sales.
“This guy was like this when he was at headquarters too. He’s just an expert at making himself look clean and everyone else look bad.”
Jeon Seung-jae clenched his jaw as if trying to contain his anger.
“If you’re getting paid by the company, you should think in ways that benefit the company. It’s always ‘client this, client that’ with him.”
The team leader quietly watched Jeon Seung-jae as he spoke.
In truth, he could understand Ryu Tae-hwa’s position to some extent.
It was ultimately just a difference in philosophy between Jeon Seung-jae, who wanted to maximize the company’s profits, and Ryu Tae-hwa, who thought that client benefits were the company’s benefits.
“The guy who used to walk around with his head held high gets pushed out to a branch, and he still can’t kill that measly pride of his.”
Whatever had happened between Jeon Seung-jae and Ryu Tae-hwa, Jeon Seung-jae seemed to harbor ill will towards him.
However, Jeon Seung-jae had the upper hand in terms of justification.
From an outside perspective, setting aside the emotions between the two, Jeon Seung-jae was prioritizing the company’s interests.
“What does the Vice President see in a guy like that…”
Jeon Seung-jae sighed and looked at the team leader.
“Good job on writing the report.”
“It was nothing.”
“But we can’t submit this to the higher-ups. They said to watch for three months.”
“Pardon?”
The team leader asked Jeon Seung-jae as if hearing this for the first time.
“I don’t know how Ryu Tae-hwa sweet-talked the Vice President, but they said to watch for three months and conduct a re-audit if there’s no improvement.”
“Then…”
“What can we do? If the Vice President says so, they must have their reasons.”
Saying this, Jeon Seung-jae stood up and patted the team leader’s shoulder.
“Don’t worry. People don’t change that easily. Ryu Tae-hwa will still be doing things his way. We’ll be able to use this report again then.”
“Yes, understood.”
“Let’s make sure we nail him then.”
With those words, Jeon Seung-jae headed back to his desk.
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“It’s no different from a dawn raid.”
A dawn raid was a corporate takeover strategy where shares were quietly accumulated below the surface during a hostile takeover, and then the takeover intent was suddenly communicated to the target.
Carl Sutton had rapidly increased his stake in DU using Steellife as a proxy instead of his own Sutton Capital, and launched a surprise attack.
“Do they have any demands?”
In the conference room at DU’s headquarters.
The presidents of each subsidiary were receiving a report from the group’s planning director with serious expressions.
Steellife had initially reported their purpose as simple investment, but as they bought additional shares, they changed their reported purpose to management participation.
With the group’s Chairman detained and under investigation by prosecutors, the Vice Chairman had summoned the subsidiary presidents to make group decisions.
“Yes, we’ve received recommendation letters for three outside directors from the law firm representing Steellife in Korea.”
At the planning director’s words, the subsidiary presidents in the conference room began to murmur, and the Vice Chairman pursed his lips and clenched his jaw.
“Here’s the list of three outside director candidates recommended by Steellife.”
“This, this…”
As the candidates’ names appeared on the screen, the subsidiary presidents were left speechless in disbelief.
“All three are known as chaebol snipers in Korea…”
The planning director, who was about to continue his briefing, closed his mouth as the Vice Chairman raised his hand to stop him.
“Is there any need for an explanation? It seems they want us to reject this.”
The corporate raiders seemed to be testing their patience.
“First, it was a demand for due diligence. And now they want us to appoint people known as chaebol snipers as outside directors?”
Outside directors were board members who were supposed to check the arbitrary actions of management to protect shareholders, and naturally had to be appointed from outside the company.
Of course, in DU’s case, this explanation was merely nominal.
The current outside directors of DU were all filled with people favorable to the group.
“Any other demands?”
“They said they would hold management legally responsible if we sell treasury shares to friendly shareholders.”
Treasury shares held by the company didn’t have voting rights in shareholders’ meetings. The way to activate these shares’ voting rights was to sell them to allies and wield the voting rights for the sold shares.
“If we ignore that demand and secure friendly shares?”
“There’s already a court precedent that such actions are unfair practices and the voting rights themselves are invalid.”
“So it would be legally problematic.”
“That’s correct.”
The Vice Chairman nodded at the president’s words. They couldn’t commit another crime when the Chairman was already detained.
“What’s the task force’s suggestion?”
“We need to find a white knight.”
Saying this, the planning director displayed DU Group’s shareholding status on the screen.
*Friendly (31.66%)
DU Steel 16.35%
Owner family 9.59%
National Pension Service 5.72%
*Unfriendly (34.04%)
Steellife 6.33%
Foreign investors 27.71%
*Neutral (25.29%)
Core Partners 4.47%
Domestic institutions 8.81%
Individual investors 6.24%
Funds and other products 5.77%
*Treasury shares 9.01%
As the executives focused on the shareholding status displayed on the screen, the planning director continued his explanation.
“Currently, excluding treasury shares, our friendly shares are only 31.66%, trailing Steellife by more than 2%.”
In the end, the management rights dispute would be decided by who secures more shares. The key to this battle was to secure as many friendly shares as possible and engage in a proxy fight at the shareholders’ meeting.
In other words, the side with more shares could cut out the current management and appoint new management.
“Will the National Pension Service side with us?”
“Yes. No matter what, I don’t think they’d want to see a domestic company torn apart and sold off by foreign capital.”
“That’s just a prediction, isn’t it?”
One of the subsidiary presidents spoke to the planning director.
“The National Pension Service has been actively using its voting rights lately, so assuming they’ll side with us…”
“I think you’re worrying too much about that issue.”
The Vice Chairman interrupted the subsidiary president.
“The planning department knows more about the pension fund’s shareholding issues. Don’t worry too much.”
The Vice Chairman spoke as if there had been some underground contact.
“Well then. So we need to draw as much of the neutral side to our side as possible.”
Foreign investors would side with Steellife. From their perspective, Steellife’s approach of increasing shareholder value would be more appealing.
“Leave out the individual investors.”
As the Vice Chairman said this, everyone nodded.
Domestic retail investors had also turned their backs on DU as the stock price plummeted.
Of course, not all individual investors would side with the corporate raiders, but this was a time to assume the worst.
“In other words, we’re currently losing in the friendly share battle.”
At the Vice Chairman’s words, heavy sighs filled the conference room. The Vice Chairman gestured to the planning director to continue.
“We need to turn the shares of domestic institutions to our side.”
“What about Core?”
“They’ve declared neutrality.”
The Hong Kong asset management firm holding 4.47% of shares had declared neutrality in this situation.
In the end, domestic securities firms and asset management companies were the strongest white knight candidates.
“Do we have a list of domestic institutions?”
“Yes. Three domestic securities firms and two asset management companies.”
At the planning director’s words, the Vice Chairman looked at the subsidiary presidents.
“Did everyone hear that?”
“Yes.”
“Representative Yu.”
“Yes, Vice Chairman.”
At the Vice Chairman’s call, the president of DU Securities looked at him with a tense expression.
“Can you reach out to the asset management companies?”
“I’ll try.”
DU Securities was a small securities firm that mainly handled the group’s securities operations.
However, the president was someone with experience in the securities industry.
“Good. The securities firms are subsidiaries of other companies, so I’ll approach them myself at the Federation of Korean Industries meeting in a few days.”
After sorting things out like this, the Vice Chairman looked at everyone.
“I hope you all remember that internal discipline is a priority, especially in difficult times. And I ask that you all actively use your connections to help resolve this issue. That’s all for now.”
As the Vice Chairman said this and left the conference room, the presidents who had been bowing their heads in greeting sighed as if they had been given a difficult homework assignment.
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“[Exclusive] Carl Sutton secretly visits Korea? Meets with Dan Levy, president of Steellife Fund, in Seoul.“
“Carl Sutton was behind Steellife Fund attacking DU.“
“Steellife: “Will streamline unprofitable subsidiaries like DU Materials.” Shows sincerity in securing management rights.“
“Steellife: “Shareholder value declined due to management’s reckless operations. Will restore shareholder value after restructuring subsidiaries.”“
“Steellife: “After securing management rights, plans to repurchase and cancel treasury shares.”“
“They’re being aggressive.”
Two weeks had already passed since Carl Sutton’s corporate raid on DU began.
Dokyung was scanning through articles about the DU situation that appeared on his HTS. The domestic media had already labeled Steellife’s attack on DU as a “crisis.”
It was an interesting scene, with sensational headlines dominating, claiming that foreign capital was attacking South Korea.
“They’re preparing the Trojan horse first.”
The timeline was unfolding exactly as Carl Sutton’s method of hunting companies. Carl Sutton and his proxy, Steellife, had demanded that DU appoint outside directors.
It was a move to plant their allies within the board of directors to keep the management in check.
Not stopping there, they seemed to be preparing for a proxy fight at the shareholders’ meeting by selectively saying things that minority shareholders wanted to hear.
“They seem to have done a lot of research on the Korean market, given that they’re not just talking about share buybacks but also cancellation.”
Dokyung recalled a post he had seen on the internet recently.
[Reasons why you shouldn’t make long-term investments in the Korean market.
Invest based on a company’s technology → They spin off the good technology into a separate company.
Invest based on future growth potential → They commit embezzlement and breach of trust.
Invest based on financial statements → They cook the books.
Invest because performance is good → It’s already reflected in the stock price. When I buy in, it falls.]
It was a post criticizing the behavior of companies listed on the stock market. They seemed to be trying to do business with shareholders’ money.
However, Carl Sutton was saying he would literally reduce the number of shares in the market by canceling the shares they bought.
If the number of tradeable shares decreased, the price would inevitably rise.
“Individual investors have no choice but to side with Carl Sutton.”
Dokyung had recently persuaded the clients he managed to invest in DU stock. New clients who had signed up for PB services based on Dokyung’s reputation agreed with his opinion, but existing clients looked at him with skeptical eyes.
Of course, this was a natural reaction when told to buy a stock full of risks from the client’s perspective.
“I need to figure out the friendly shareholdings.”
The proxy fight ultimately came down to who could secure more friendly shares. Dokyung was looking at DU’s shareholding relationships, but it was still too early to make a judgment.
Not all foreign shareholdings would side with Steellife, and not all individual shareholders were hostile to DU’s management.
“DU will move assuming the worst. If that’s the case, the battle might be decided by the shares held by domestic institutions.”
Dokyung’s expression hardened as he realized that his biggest weakness was the key to this situation.
Collecting external data or studying about companies were things Dokyung could do on his own.
But in battles like this, profits ultimately depended on who could obtain information faster.
The problem was that Dokyung was a graduate of a provincial national university, while most people in the securities industry were from famous Seoul universities. It was easier to obtain such information through networks connected by school ties.
“This is troublesome…”
Today, more than ever, the message that didn’t tell him the timing felt particularly frustrating.
Knock knock-
Just then, with a knock on Dokyung’s door, it opened and Choi Woojin entered the room.
“Dokyung-ssi, looks like this is going to be a long battle, doesn’t it?”
As soon as he entered the room, Choi Woojin spoke to Dokyung and sat down.
“The institutions are all watching and waiting right now.”
As soon as Steellife’s declaration of war against DU hit the media, the stock price had surged over 5%, but now it had settled down and was up about 3% from when Dokyung’s clients had bought in.
As Choi Woojin said, only individual investors were trading volumes among themselves, while the big players known as institutions were just watching and waiting.
“I heard Taesan is holding about 3%, not including product stocks. I mean stocks acquired with their own capital.”
“Yes, I know Taesan has made quite a large investment in DU with their own capital.”
Taesan had made significant investments in DU.
“From what I’ve heard, it seems Taesan is leaning towards supporting DU.”
“Really? Where did you hear that?”
“Oh, uh…?”
Choi Woojin had spoken casually, but when Dokyung asked urgently, he was taken aback.
“Well, I have a chat room with college friends who got jobs at securities firms or asset management companies. A friend at Taesan was talking about the company atmosphere… Why? Is something wrong?”
At Choi Woojin’s words, Dokyung’s lips curled into a smirk.
There was someone who could tell him about the information circulating within the securities industry, which was his weak point.
“No. It’s just such good information.”
And they were very close by.