Activist Shorts, a specialist data provider on short-side research, has just published an article on the emergence of short-selling activist in Japan over the last year in its September 2016 issue. In the article, Well Investments’ head of research Yuki Arai, also shares his views on why the sector has growth potential in Japan today.
The introduction of new governance reforms by Prime Minister Shinzo Abe’s government over the last three to four years has given confidence to activist investors in the country, writes Activist Shorts. The number of firms in Japan facing shareholder activist demands broke into double figures for the first time this year, although it is still a far cry from the 410 companies facing the same in the U.S., the September issue notes.
In Japan, activist short sellers have launched six campaigns to date – five in 2016 alone – and have recorded an impressive 30.4% average campaign length return so far, according to Activist Shorts.
Mr. Arai told Activist Shorts that he formed Well Investments, the first activist to publish short-side research in the country, because “Japan’s capital markets had come to accept poor disclosure and had overlooked opaque issues around Japanese firms.” Well Investments’ first report, on Marubeni in Dec. 2015, concluded that Tokyo-based trading house Marubeni risked incurring a large fine for deliberately not recognizing impairments. The call was made on the base of a record fine Japanese regulators slapped on Toshiba after the company was found to have massaged its accounts.
Mr. Arai told Activist Shorts’ “Insight Monthly” report that he was interested in critical research on Japanese companies because such a product wasn’t being provided by the sell side in the country. In Japan “people take [critical comments] very negatively and analysts want to continue to work for bigger institutions/companies in the industry,” Mr. Arai said.
Activist Shorts notes that Well Investments has gone on to publish reports on a Japanese company called Jig-Saw, which presents itself as high-tech but has little proof of this, and also on the robotics firm Cyberdyne, whose stock has been tremendously overvalued.
As Mr. Arai notes to Activist Shorts, the message from Well Investments has always been that we believe the Japanese market can win much larger interest from global investors and higher valuations when it is regarded as the world’s most open, transparent and objective. Well Investments activity is making a contribution towards this.