Activist Fund Targets Japan's Sumitomo Corporation... Elliott Makes Equity Investment

US-based activist hedge fund Elliott Management has made a large investment in Sumitomo Corporation, one of Japan's five major general trading companies, aiming to secure a stake.

Bloomberg News reported on the 28th (local time), citing sources, that Elliott has secured a stake in Sumitomo worth "hundreds of billions of yen." This information has not yet been disclosed through official filings. The report stated, "Based on the closing price on the 26th (3,909 yen), an investment of 10 billion yen corresponds to about 0.2% of Sumitomo's shares."

Sources explained that Elliott has shared management methods with Sumitomo that can create shareholder value. The timing of Elliott's stake acquisition and discussions with Sumitomo have not been confirmed. Founded by billionaire Paul Singer, Elliott is known as an activist fund that accumulates company shares, demands management improvements from executives, and aims for stock price increases. It has previously targeted major Japanese companies such as Toshiba and SoftBank. Domestically, it has raised issues regarding the merger process between Samsung C&T and Cheil Industries and has demanded governance improvements from the Hyundai Motor Group.

Japan, in particular, has recently been regarded as the hottest market among activist investors including Elliott. The report conveyed that recently, the Tokyo Stock Exchange has recommended listed companies to improve financial statement management and strengthen shareholder returns, encouraging activist investors to focus on the Japanese market. Elliott recently also demanded management improvements from Mitsui Fudosan, Japan's largest real estate developer.

Moreover, Japanese general trading companies including Sumitomo have also been targets of increased stake investments by Berkshire Hathaway, the US investment company led by "investment master" Warren Buffett. According to Bloomberg, Berkshire holds about 8.3% of Sumitomo's shares. Sumitomo's stock price reached an all-time high last week, rising a remarkable 27% just this year.

However, the Nihon Keizai Shimbun assessed that this stock price increase "does not match the levels of peer competitors such as Mitsubishi Corporation (55%)" and suggested that "Elliott may intensify pressure to raise the stock price." Sumitomo's financial results for the 2023 fiscal year will be announced on the 2nd. The company is also expected to disclose its medium-term business plan at that time.