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SC Fundamentals, however, took issue with the absolute size of the dividend, which is 32% lower than last year's 7700 won per share (based on common stock). "Even if the net profit decreased last year, the retained earnings accumulated over the years exceeds 800 billion won, so the company can afford to pay out dividends if it has the will," SC Fundamental argued.
SC Fundamentals reportedly holds a 1.4 percent stake in the company and more than 3 percent in the hands of foreign friendly shareholders. In addition, SC calculates that if it joins forces with other foreign shareholders and domestic institutions such as JP Morgan (4.5%) and Massachusetts International Fund (6.26%), it is worth voting at the shareholders' meeting.
[Reporter Kim Hye-soon]
뉴스2016년 2월 16일
[Maeil Business] US hedge fund attacks GS Home Shopping
SC Fundamental, a U.S.-based activist hedge fund that is actively involved in the management of companies it invests in, has asked GS Home Shopping to increase its dividend to 80 percent of last year's net profit and buy back 10 percent of its own shares at its annual general meeting in March. Although it is not a management control dispute, it is highly unusual for an activist hedge fund to formally demand a shareholder return policy against a major Korean company.
SC Fundamental's move to secure a favorable stake in GS Home Shopping has raised the possibility of another shareholder vote battle between a Korean conglomerate and a U.S.-based activist hedge fund, following the dispute between Samsung C&T and Elliott. In preparation for the court battle, GS Home Shopping has signed an advisory contract with law firm Gwangjang, while SC Fundamental has tapped law firm Hanbyul as its representative. According to the financial investment industry on the 15th, SC Fundamental sent a shareholder proposal to GS Home Shopping at the end of last month that included a dividend increase, stock buyback cancellation, and appointment of outside directors. The proposal is to increase the cash dividend to 10,000 won per share, double the company's planned amount, and to buy back 623,941 shares, or 10 percent of the outstanding shares, and burn them to boost the stock price.
GS Home Shopping announced on the 7th that it will pay 5,200 won per common share as a dividend for the 2015 fiscal year. GS Home Shopping's dividend payout ratio, which is the total amount of dividends as a percentage of net income, is 41.2%, two to three times higher than its competitors Hyundai Home Shopping (16.0%) and CJ O Shopping (13.4%). Last year, GS Home Shopping's net profit fell 31.5 percent year-on-year to 78.4 billion won due to the MERS outbreak and the fake Baeksuo wave, but the company maintained its dividend payout ratio at a similar level to the previous year.
"As we are struggling with sluggish consumption, it is unreasonable to ask for 80% of our net profit to be distributed," said a GS Home Shopping official, adding, "We will strive to improve our performance and pay more dividends to shareholders." To buy back shares and pay out more dividends as demanded by the hedge funds, the company would need to spend another 111.1 billion won and 29.8 billion won, respectively.
SC Fundamental's move to secure a favorable stake in GS Home Shopping has raised the possibility of another shareholder vote battle between a Korean conglomerate and a U.S.-based activist hedge fund, following the dispute between Samsung C&T and Elliott. In preparation for the court battle, GS Home Shopping has signed an advisory contract with law firm Gwangjang, while SC Fundamental has tapped law firm Hanbyul as its representative. According to the financial investment industry on the 15th, SC Fundamental sent a shareholder proposal to GS Home Shopping at the end of last month that included a dividend increase, stock buyback cancellation, and appointment of outside directors. The proposal is to increase the cash dividend to 10,000 won per share, double the company's planned amount, and to buy back 623,941 shares, or 10 percent of the outstanding shares, and burn them to boost the stock price.
GS Home Shopping announced on the 7th that it will pay 5,200 won per common share as a dividend for the 2015 fiscal year. GS Home Shopping's dividend payout ratio, which is the total amount of dividends as a percentage of net income, is 41.2%, two to three times higher than its competitors Hyundai Home Shopping (16.0%) and CJ O Shopping (13.4%). Last year, GS Home Shopping's net profit fell 31.5 percent year-on-year to 78.4 billion won due to the MERS outbreak and the fake Baeksuo wave, but the company maintained its dividend payout ratio at a similar level to the previous year.
"As we are struggling with sluggish consumption, it is unreasonable to ask for 80% of our net profit to be distributed," said a GS Home Shopping official, adding, "We will strive to improve our performance and pay more dividends to shareholders." To buy back shares and pay out more dividends as demanded by the hedge funds, the company would need to spend another 111.1 billion won and 29.8 billion won, respectively.
SC Fundamentals, however, took issue with the absolute size of the dividend, which is 32% lower than last year's 7700 won per share (based on common stock). "Even if the net profit decreased last year, the retained earnings accumulated over the years exceeds 800 billion won, so the company can afford to pay out dividends if it has the will," SC Fundamental argued.
SC Fundamentals reportedly holds a 1.4 percent stake in the company and more than 3 percent in the hands of foreign friendly shareholders. In addition, SC calculates that if it joins forces with other foreign shareholders and domestic institutions such as JP Morgan (4.5%) and Massachusetts International Fund (6.26%), it is worth voting at the shareholders' meeting.
[Reporter Kim Hye-soon]
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