The world’s largest automaker, Japan’s Toyota Motor, has recently unveiled plans to finance its research and development through an unusual stock issue that might be entirely avoided by institutional investors.
Instead, the company has shun hedge funds and set its eyes on private investors that will accept the long-term view of the strategy in exchange for safety – the new Model AA shares – which are a nod to the company’s first car. They will have the investor tied to the company for half a decade and the interest payments will not exceed 2.5 percent. The move comes as part of the plan envisioned by Toyota president Akio Toyoda to attract prospective long-term shareholders – the company believes institutional investors will avoid it because of the trading inability that spans five years. Instead, buy-and-hold private investors will have protection from any loss and the chance to profit if the common shares are on the rise. The automaker’s drive towards the new security model also has to do with the recent resurgence of activist investorship and the clash with corporation management.
At the end of April, the carmaker announced the new AA model shares that could reach as much as 500 billion yen, adding the money would be used for research and development, which includes the advances on the fuel cell field needed to bring the next generation of hydrogen-powered cars to life. The idea behind the stock is simple – match the needed time to develop new technologies and models to the time shares are being held by investors.