The largest automaker in the world, and also Japan’s biggest company, is looking to win approval to create as much as 500 billion yen ($4 billion) of convertible equity, shares with debt-like components and locked from selling for half a decade.
The same proposal has the company seeking to buy back the same amount of common shares, with the company claiming the need to skip dilution. The automaker’s view is the new stock might lift corporate governance as it locks patient owners, but Hiroki Sampei, the director of research at Fidelity Worldwide Investment in Tokyo says the firm is actually trying to mask its real strategy – oppose dissent. His opinion is also echoed by echo proxy adviser Institutional Shareholder Services Inc., which advised investors to veto the motion to establish the Model AA shares when the approval is sought on June 16. There are more minor shareholders, such as the California State Teachers’ Retirement System that also oppose the plan. “I’m skeptical about it,” commented Sampei. “It will increase owners who are different from the kind of long-term holders that the governance code is seeking to foster.” The stock would be unlisted and have a yearly dividend starting at 0.5 percent, growing by 0.5 percentage point annually to a limit of 2.5 percent.
The company said the financing secured through the Model AA shares would then be used to support research and development and increase the force of medium to long-term shareholders. But the traditional investors, such as Calstrs, the second-largest US pension fund, have said they would opt against the dual-class structure as it is primary beneficial for Japanese investors.