Stick Investment Faces Intensifying Dispute Over Cancellation of 13% Treasury Shares

Stick: "No Current Plans to Cancel or Dispose of Treasury Shares"
Align: "Intends to Use Them to Strengthen Control"
Further Action Expected if No Cancellation Announcement by the 14th

Stick Investment, a domestic private equity fund (PEF) management company, announced that it currently has "no confirmed plans to cancel or dispose of" over 13% of its treasury shares, adding, "We will make decisions with a focus on enhancing shareholder value in the future." In response, Align Partners Capital Management, the third-largest shareholder and an activist fund, stated, "We understand this as a clear indication that the company intends to keep open the possibility of discretionary use of treasury shares. If Stick Investment does not announce a change in its position by the 14th, we will proceed with additional actions to protect shareholder rights."

Previously, on the 5th, Align Partners demanded, "Stick Investment's board should confirm that it is not considering the discretionary disposal of treasury shares, and publicly disclose by November 14 specific plans for the disposal or cancellation of treasury shares, as well as other measures to enhance shareholder value and the board's review of these matters."

However, on the 6th, a Stick Investment representative stated, "Our principle of ultimately using treasury shares to enhance corporate value and, by extension, shareholder value remains unchanged," and clarified, "Currently, there are no ongoing discussions regarding the cancellation, disposal, or any merger and acquisition (M&A) plans involving treasury shares." The representative added, "Any future decisions on this matter will be made with the utmost priority on enhancing corporate and shareholder value, and will be executed in strict compliance with internal regulations and legal requirements."

In response to Stick Investment's position, Align Partners reiterated its opposition on the 6th. Align stated, "If Stick Investment truly wishes to enhance shareholder value, it should cancel, not 'utilize,' its treasury shares, as this has been a long-standing demand from many shareholders." The firm pointed out, "Stick Investment has held a large amount of treasury shares for over 17 years, including during the DPC era." Align further argued, "If there are no other funding methods such as retained cash or borrowing to pursue M&A deals that benefit shareholder value, the company can conduct a paid-in capital increase, which is economically equivalent to disposing of treasury shares." Align added, "If the company refuses to cancel treasury shares while leaving open the possibility of their use, it is difficult to see any reasonable purpose other than to strengthen the controlling shareholder's influence in the future."

Align Partners warned that if Stick Investment does not announce a change in its position by the 14th, the deadline for the disclosure of its third-quarter report, it will take further action to protect shareholder rights.

Currently, the largest shareholder of Stick Investment (Chairman Do Yonghwan and related parties) holds a 19.04% stake. Other major shareholders include US-based investment firm Millie Capital (13.38%), Align Partners (7.63%), and Petra Asset Management (5.09%).