HFR Minority Shareholders Angry... 'Treasury Stock Purchase Proposal' Vote Battle Anticipated

After Record High Performance in 2022, Management-Shareholder Conflicts Emerge
Passive Response to Calls for Share Buybacks and Cancellation
Shareholder Coalition Gathers 12.5% Through Proxy Voting Encouragement

Minority shareholders of the telecommunications equipment company HFR have united to enhance shareholder value. At the upcoming regular general meeting of shareholders on the 29th, they plan to propose agenda items such as treasury stock acquisition and cancellation, and auditor appointment, signaling a vote showdown.

According to the Financial Supervisory Service on the 26th, the HFR shareholder coalition secured a 12.5% stake (1,686,686 shares) as of the 22nd.

The shareholder coalition emphasized that although HFR's management promised to become a shareholder-friendly company at last year's general meeting, nothing has changed over the past year. Previously, the management had announced measures reflecting shareholder opinions at the general meeting on March 24 last year, including ▲ sharing guidance and future business vision ▲ treasury stock purchase and cancellation ▲ consideration of quarterly dividends ▲ strengthening investor relations (IR) activities.

HFR is a telecommunications equipment manufacturer founded in 2000 by CEO Jeong Jong-min, a former senior researcher at SK Telecom. The largest shareholder, CEO Jeong, holds a 29.5% stake (3,981,653 shares). Last year, the company recorded sales of 164.2 billion KRW, an operating loss of 8.4 billion KRW, and a net profit of 1.9 billion KRW. Compared to the previous year, sales decreased by 55%, and operating profit turned to a loss.

The shareholder coalition proposed agenda items for the general meeting, including a plan to purchase treasury stock worth 10 billion KRW by the first half of this year and the cancellation of held treasury stock. They also proposed appointing attorney Heo Kwon from the law firm Weon as an auditor.

To pass the shareholder proposal agenda, they have been focusing on proxy voting through the electronic delegation system since the 22nd. Their plan is to gather as many minority shareholders as possible before the general meeting to engage in a vote showdown with the largest shareholder side.

Since last year, HFR and the shareholder coalition have shown signs of conflict. HFR achieved record-high performance in 2022, with sales of 366.3 billion KRW and operating profit of 90.2 billion KRW, driven by strong North American exports of front-haul equipment. Front-haul is 5G telecommunications equipment that connects digital data processing devices and remote wireless signal processing devices in the wireless access network of mobile communications.

Despite achieving record performance, HFR showed reluctance toward shareholder-friendly policies, prompting the shareholder coalition to raise their voices. They began consolidating voting rights through the shareholder activism platform "HeyHolder." Last June, HFR decided to acquire treasury stock worth 4.1 billion KRW to stabilize the stock price and enhance shareholder value.

Attorney Heo Kwon, who leads HeyHolder, said, "The government is also encouraging shareholder returns of listed companies by announcing corporate value-up programs," adding, "HFR is thoroughly ignoring the voices of its shareholders."

The shareholder coalition explained that the number of shareholders joining them is increasing, and the number of shares entrusted with voting rights is growing over time.