Gaijins at the Gate

What's your catalyst?

Activism in Japan: A Compelling Trend

Lately, I’ve been diving into a fascinating trend—activist investing in Japan. What struck me immediately was the sheer number of funds focused on engagement there and, more importantly, their exceptional performance. Across the board, their returns are remarkable.

Interestingly, many of these funds are domiciled in Singapore, likely for the lower tax rate and possibly for safety (being an activist in Japan used to entail a fair bit of personal risk - i.e. Yoshiaki Murakami's arrest and conviction). Today, the three largest Japan-focused activist investors I know of—Murakami’s family office, Effissimo (founded by Murakami’s former employees), and 3D Investment Partners—are all headquartered in Singapore.

Why Activism?

My interest in activism comes from lessons learned during my own investing journey. A few successful investments in Chinese real estate bonds over the last two years highlighted the importance of having a hard catalyst. In the case of bonds, the catalyst is clear: if a company fails to pay principal when due, liquidation is often inevitable. As a result, companies tend to find ways to pay. This certainty of outcome is a key difference from traditional value investing in equities, where you might identify a deeply undervalued asset but lack a clear path to realizing that value.

Value investing in Asia is particularly frustrating. While deep value often stares you in the face—companies with undervalued land, buildings marked at cost, or large stock portfolios—it’s tough to unlock that value. Many of these companies are controlled by families or strategic investors who prioritize their own objectives over shareholder value. The result is perpetually undervalued companies, especially in Hong Kong and Southeast Asia, where they continue to trade at deeper and deeper discounts to NAV. This might be the tail end of the growth-versus-value rotation, and value could come roaring back. Or it might reflect a harsh truth: the market now accepts that these balance sheet assets will never be realized.

Activism, however, offers a clear path to value realization. Japan, in particular, is fertile ground for activism. Shareholder registers are wide open, liquidity is good, and regulations are friendly—you can call an EGM with just 3% ownership! Today, dozens of activists are shaking things up in Japan, delivering results at a pace that’s hard to match.

Sharingtechnology, Inc.

One company I’ve been analyzing recently is Sharingtechnology, Inc. (Ticker: 3989.T). It reminds me of IAC’s Angi Inc. ($ANGI)—but better.

With a market cap of ~¥19 billion (about $120 million USD), Sharingtechnology has some compelling characteristics:

• Public float of 88% with daily liquidity of 1.7% of shares outstanding, making it feasible for an activist to acquire a 3% stake within a week.

• Growth exceeding 20% annually, a net income margin of ~20%, and a valuation of just 13x LTM P/E.

• Over 20% of its market cap held in cash.

Even better, the company is already taking steps to maximize shareholder value. It plans to double its dividend (yielding over 3.5%) and buy back ¥500 million worth of shares (~2.5% of shares outstanding), offering a total shareholder yield of 5–6%.

The icing on the cake? AVI Japan Opportunities Trust ($AJOT) is actively building a position, currently holding 9.6%. This creates a setup where value realization could happen swiftly and decisively.

Quick company overview link here.

Paraphrasing Kerrisdale this is not investment advice, and “is provided to you solely for your own entertainment purposes”.