Life Asset Management Sends First Public Shareholder Letter
Demands Cancellation of 1.8 Million Treasury Shares
Also Proposes Establishment of 'Risk Committee'
[Asia Economy Reporter Hwang Yoon-joo] Life Asset Management, chaired by Lee Chae-won, former CEO of Korea Investment Value Asset Management and a first-generation value investor in Korea, has demanded that SK Inc. cancel 10% of its treasury shares and establish a Risk Committee.
Life Asset Management announced on the 26th that it had sent a shareholder letter containing these demands to SK Inc. This is the first time Life Asset Management has sent a public shareholder letter.
Specifically, they requested the cancellation of 1.8 million treasury shares (market value approximately 460 billion KRW). As of the end of 2021, SK Inc. holds treasury shares amounting to 24% of the total issued shares.
Since 2017, SK Inc. has generated an annual growth rate of 11.5% in book value per share (BPS). During the same period, Berkshire Hathaway's BPS growth rate was around 12% annually. Despite excellent performance and changes in business structure, Life Asset Management explains that SK Inc.'s market value (stock price) remains at the level of five years ago due to a chronic holding company discount.
Additionally, Life Asset Management proposed appointing a Chief Risk Officer (CRO) to manage the total amount of investment risk and establishing a Risk Management Committee to alleviate concerns about SK Inc.'s crisis response capability amid rapid structural changes.
CEO Kang Dae-kwon stated, "SK Inc.'s main source of funding is dividends received from subsidiaries, but recently, both the holding company and subsidiaries have simultaneously expanded their investment scale, reducing dividends and increasing reliance on short-term borrowings. Concerns about SK Inc.'s cash flow could act as a factor discounting corporate value."
In fact, SoftBank, considered a leading global investment company, is receiving an even more severe discount than SK Inc. The main causes of such undervaluation are the burden of financial risk and the absence of an internal control system capable of managing it.
Meanwhile, Life Asset Management was launched last year advocating 'ESG (Environmental, Social, and Governance) friendly activism' and manages assets worth 270 billion KRW.
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