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(Seoul=Yonhap Infomax) Kyu Sun Lee—An activist fund is calling on its portfolio company to scale back dividends and prioritize reinvestment for growth.
Align Partners Asset Management has proposed that Stick Investment Co., a major South Korean private equity firm, reduce its dividend payouts and reallocate capital more efficiently to drive expansion.
According to the financial investment industry on the 25th, Align Partners Asset Management (hereafter "Align") sent an open shareholder letter to the board of Stick Investment, recommending that the company "minimize dividends until growth targets are achieved and prioritize surplus capital for increasing general partner (GP) commitments."
This move is closely linked to Align CEO Chang Hwan Lee's background as a former executive at global private equity giant KKR (Kohlberg Kravis Roberts). Industry analysts note that Lee is seeking to apply global best practices learned at top-tier PE firms to a leading domestic player.
Dividend Payout Ratio Nears 100%—"Focus on Growing AUM, Not Depleting Growth Capital"
Align's proposal shifts the focus from immediate "high dividends" to "high growth."
This stance is rooted in Stick Investment's underwhelming capital efficiency. Despite managing over 10 trillion won ($7.6 billion) in assets under management (AUM), Stick Investment's return on equity (ROE) over the past 12 months stands at just 0.3%, according to Align's analysis.
Align attributes this inefficiency to conservative capital management. Unlike global private equity managers who actively leverage their own capital—sometimes even borrowing—to increase GP commitments and grow assets, Stick Investment maintains a de facto debt-free policy, with a net financial leverage ratio of just 1.2x compared to the global peer average of 4.2x.
Align stated, "The more decisively an asset manager commits its own capital to its funds, the greater the trust from major limited partners (LPs) such as the National Pension Service. This leads directly to larger fund sizes, increased AUM, and a virtuous cycle of higher recurring fee-related earnings."
Stick Investment has raised its dividend per share from 90 won in 2020 to 250 won last year. Notably, in 2023, the company paid out 97% of its net profit as dividends, effectively returning nearly all earnings to shareholders. Align argues that cash needed for growth is being depleted through dividends and should instead be reinvested to expand AUM and enhance corporate value.
The Essence of Treasury Share Cancellation—Addressing Governance Risk, Not Just EPS
Align's call for the cancellation of a large portion of treasury shares is not merely aimed at boosting earnings per share (EPS). The fund views this as a critical step toward normalizing corporate governance.
Currently, Stick Investment's treasury shares could be misused as a defensive tool by controlling shareholders in the event of a management dispute. If the company were to transfer these shares to a third party (a "white knight"), voting rights could be revived and used to bolster the controlling shareholder's position. Align points out that such uncertainty constitutes a "governance risk" that leads to a discounted share price.
Align argues that removing this "private safety net" for controlling shareholders is essential to eliminate conflicts of interest with minority shareholders and ensure fair valuation of the company.
However, Align does not demand the cancellation of all treasury shares. The fund suggests retaining a portion as restricted stock units (RSUs) to incentivize next-generation management and employees, emphasizing that talent retention is vital for long-term growth.
Stick Investment responded partially by announcing the introduction of RSUs on the 21st. However, Align criticized the lack of communication regarding specific recipients and conditions for the stock-based compensation plan.
Align has requested that Stick Investment's board present a concrete value enhancement plan reflecting these proposals by January 19, 2026.
kslee2@yna.co.kr
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