Do You Have a Quiet H.E.R.O. In Your Portfolio Protecting & Fighting For You? [Japan’s #1 Shareholder Register Data Analytics & Consulting Firm]
"What the world needs now is a quieter breed of hero, one actively fighting for a world in which rescues are no longer required." - Dan Heath
In his insightful book Upstream: How to Solve Problems Before They Happen that drew on insights from hundreds of interviews with unconventional problem solvers, Dan Heath shared that so often in life, we get stuck in a cycle of response. We put out fires. We deal with emergencies. We stay downstream, handling one problem after another, but we never make our way upstream to fix the systems that caused the problems. The police solve crimes, doctors treat patients with chronic illnesses, shelter is provided for the homeless. But we would all rather live in a world where crimes are not committed, diseases do not develop, and people do not lose their homes. So why do our efforts skew so heavily toward reaction rather than prevention? The need to prevent problems is perennial in our professional and daily lives, and we have the capacity to solve some of our thorniest issues - if only we start to think about the system rather than the symptoms. If only we start to think upstream.
Heath illuminated the vision that the world needs a quieter breed of UPSTREAM hero. UPSTREAM business models and strategies have also forged the enduring and exponential growth trajectory of our quiet H.E.R.O. innovators.
Case Story: Japan's #1 Shareholder Register Data Analytics & Consulting Firm
[Week (21-25 Sep): +11.1%]
Another uplifting UPSTREAM story in our portfolio companies in the Fund is Japan's #1 shareholder register data analytics & consulting firm who helps firms fight against shareholder activists and secure control, which is up 6% since the inception of the Fund on 28 August 2020, versus MSCI ACWI World index/NASDAQ -5.1%/-6.7% over the same period. The rising dividend-yielding company has also compounded 3,188% in capital gains in the recent 5 years vs MSCI ACWI World index +42.9%.
The pressure being placed on Japanese companies to review corporate governance, business and asset portfolios is increasing, including that a record-high number of listed companies have received shareholder proposals from activists, institutional shareholders, and individual shareholders. In this situation, the company has established a system to provide equity solutions in which it responds quickly and appropriately to deal with sophisticated and complex capital risks. Consequently, the company is leveraging its independent nature and incorporating the viewpoints of minority shareholders, and this has led to an increase in sales.
This innovator is a detective of the shareholder register, using techniques developed over decades to find out with accuracy and speed the true owners of a company’s shares, which are often hidden behind custodians, and then provides forecasts of shareholder vote outcomes based on its analysis of shareholder lists. The little-known company then advises management on how to handle dissident stock holders and ensure they aren’t defeated in shareholder votes. It is the only company in Japan that has intelligence on who exercises voting rights based on the shareholder list, information that’s not available elsewhere. The company has also commercialized in Feb 2018 a data analytics service using artificial intelligence in risk analysis by activists.
CEO Mr. T shared: "We have over 80% share of the shareholder register market intelligence market and almost no loss in proxy fights. We’re the only company that has intelligence on who exercises voting rights based on the shareholder list. It’s information that’s not available elsewhere. Finding out who’s really on the shareholder register is increasingly important for listed firms, but it’s no easy task. 30% of what we do is scour publicly available information such as company and investor filings. The remaining 70% is where our expertise comes in. We have gathered data on asset managers and other investors for more than 20 years, and also information on how shareholder lists have changed. To fill the remaining gaps, a group of internal researchers calls investors to ask them about their holdings.”
"At first, we were thinking about developing our voting rights-related services business through a partner agreement, but in the end we decided to completely launch our own voting rights business from the beginning. This is because I felt that it would not fit Japanese companies looking for very detailed services, even if they imported the methods of partner companies as they are. Looking back now, this was a very fortunate thing for us. We were the first in Japan to start our own voting rights business. This service meets the needs of companies that are having trouble boxing shareholders, and the number of client companies has increased explosively. We have built up relationships of trust with overseas investors one by one through our commitment to daily work, our voting rights, our knowledge of the Companies Act, and the careful explanation of the Japanese. market. At the beginning of the business, I sometimes came to the company at three o'clock in the middle of the night and called New York. I said that overseas shareholders were black boxes for Japanese companies, but in fact, the corporate governance of Japanese companies was black box for overseas shareholders.”