Leopard Asset Management Urges Sun Corporation’s Shareholders to Hold Management Accountable for Their Failure to Achieve Their Own Stated Goals of Increasing Shareholder Value

Rhea-AI Summary

Leopard Asset Management (LAM) is calling on Sun shareholders to hold the company's management accountable for failing to increase shareholder value. LAM has highlighted Sun's undervaluation, primarily due to its significant holdings in Cellebrite (NASDAQ: CLBT), and other liquid assets.

Since LAM's campaign in March 2024, Sun's share price briefly increased by 23% but fell by 19% after a disappointing AGM agenda was released, indicating a lack of trust in management.

LAM urges shareholders to vote against CEO Ryusuke Utsumi and his team in the upcoming June 25 AGM, citing management's failure to take meaningful action to close the valuation gap.

Sun's shares are valued at ¥7,200 based on liquid assets, far above the current market price of ¥3,300, emphasizing the need for a change in leadership to realize the company's true value.

Positive

• Sun 's share price increased by 23% following LAM's campaign, adding ¥19 billion to its market capitalization.
• Average daily trading volume surged by 160% compared to early 2024, reflecting increased investor interest.
• Fair value for Sun's shares based on liquid assets is estimated at ¥7,200 compared to the current market price of ¥3,300.

Negative

• Share price plummeted by 19% after a 'no-news' AGM agenda was released, wiping out approximately ¥17 billion in shareholder value in three days.
• Management has failed to take meaningful action to address undervaluation, causing shareholder frustration.
• Sun's management has not provided a clear plan for enhancing shareholder value despite repeated statements of considering measures.

Insights

Financial Analyst

The focal point here is the accusation that Sun Corporation's management has failed to enhance shareholder value despite having significant liquid assets and a substantial stake in Cellebrite. This discrepancy between asset value and market price creates a valuation gap that frustrates investors. Sun's management has acknowledged the undervaluation but hasn't taken decisive action. The significant increase in share price following LAM's campaign and its subsequent decline after the AGM agenda publication, demonstrates investor sentiment and the market's reaction to management's inaction.

The undervaluation means Sun's assets aren't being efficiently utilized or properly communicated to the market. This poses a risk to retail investors as the company's potential isn't being realized. The management's lack of transparency and strategic direction could result in continued underperformance of the stock, leading investors to experience opportunity costs.

For long-term investors, the key takeaway is the need for active engagement in governance. Voting against the current management could potentially bring in leadership that is more focused on unlocking shareholder value. However, this also carries risks if new management fails to capitalize on Sun's assets. As such, an investor must weigh the potential benefits of new management against the risks of a leadership change.

Corporate Governance Expert

The core issue raised concerns the accountability of Sun Corporation's board and the effectiveness of their governance practices. The LAM's urging to vote against the CEO highlights the importance of shareholder activism in corporate governance. This move is a classic example of how minority shareholders can influence corporate strategy and leadership decisions.

Sun's board has been criticized for a lack of actionable plans and insufficient communication with shareholders. Effective governance requires not just strategic intent but also clear, consistent communication and execution. The recurring statements about considering measures without concrete actions suggest a disconnect between management and shareholder interests. Inadequate governance can lead to mismanagement of resources and lost opportunities for growth.

Retail investors should consider the potential implications of a board overhaul. While it may bring positive changes, it could also introduce instability. Governance issues tend to affect company reputation and investor confidence, which can result in volatile stock performance. Active participation in AGMs and monitoring board behavior is important for shareholders to protect their investments.

Further information is available http://www.valueforsun.com/agm

TEL AVIV, Israel--(BUSINESS WIRE)-- Leopard Asset Management Ltd. (“LAM”) advises various longstanding minority shareholders in Sun Corporation (stock code: 6736 JP). LAM urges Sun’s shareholders to hold management accountable for their failure to achieve their own stated goals of increasing shareholder value. On June 25, vote against Ryusuke Utsumi, CEO and his management team.

Since we raised concerns about the undervaluation of Sun in March 2024 and debunked Sun’s management push-back on our suggestion to distribute the shares of Cellebrite (NASDAQ:CLBT US) as a dividend to shareholders, fellow shareholders have reached out and expressed their frustration with management.

Sun’s value is derived from cash and securities holding, 47% holdings in Cellebrite and its entertainment and IT business. We believe, the fair value for Sun’s shares based on its liquid assets alone is in excess of ¥7,200, after accounting for deferred taxes. This compares to the current market price of ¥3,300. Based on the (lack of) actions of Sun’s management up to now, we believe they are not genuinely interested in closing this gap.

Between the launch of LAM’s campaign in March and management's release of the upcoming AGM agenda, Sun's share price appreciated by 23%, reaching an all-time high of ¥4,250 and adding approximately ¥19 billion to its market capitalization. During this period, the average daily trading volume increased by 160% compared to early 2024, exceeding an average of 80,000 shares per day. This surge reflects investors’ belief that management would address Sun's share price undervaluation. However, after the company published a “no-news” agenda for the June AGM, the share price plummeted by 19%, wiping out approximately ¥17 billion in shareholder value in three days. We believe this decline highlights shareholders’ lack of trust in Sun’s management will to resolve this undervaluation.

Sun’s management stated in November 2021 that it is “considering all possible measures to improve this situation [undervaluation]”. Then again, in reply to our engagement, management wrote in February 2024 ”We are considering various measures to enhance the SUN’s shareholder value (…)”.

We believe management has had ample time to drive change and realize the value of the company’s assets. Shareholders must hold management accountable by exercising their rights and decide:

• has this management been openly communicating its plan for the company and for its holding in Cellebrite, which accounts for more than double the market value of Sun?
• have they made any genuine effort to resolve this undervaluation?
• do they have any actionable plan for the liquid assets which comprise more than 70% of the balance sheet?
• are they the best leadership to grow Sun’s entertainment and IT business?

We call on shareholders to hold the board accountable for their lack of action and entrenchment.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240603545266/en/

Ophir Dortheimer

info@leopard-mgmt.com

Source: Leopard Asset Management

FAQ

Why is Leopard Asset Management urging Sun shareholders to vote against the management?

Leopard Asset Management believes Sun's management has failed to take meaningful action to increase shareholder value and address the company's undervaluation.

What is the significance of Cellebrite (NASDAQ: CLBT) in Sun 's valuation?

Sun's significant holdings in Cellebrite are a major part of its valuation, with LAM suggesting the distribution of these shares as a dividend to shareholders.

How did Sun 's share price react to LAM's campaign and the AGM agenda release?

Sun's share price initially increased by 23% following LAM's campaign but fell by 19% after the release of the AGM agenda, indicating a lack of trust in management.

What is the fair value of Sun ’s shares according to LAM?

LAM estimates the fair value of Sun 's shares to be ¥7,200 based on its liquid assets, far above the current market price of ¥3,300.

When is Sun 's AGM, and what is at stake?

Sun 's AGM is on June 25, and shareholders are urged to vote against CEO Ryusuke Utsumi and his management team for their failure to enhance shareholder value.