Singapore-based investment fund 3D Investment Partners has acquired a 5.47% stake in Square Enix Holdings, Reuters reported on April 28. The stated purpose for acquiring the assets is “pure investment, and depending on circumstances, to offer advice or make significant proposals to management.”
3D Investment Partners is known for being an activist investor, meaning that it seeks to buy significant stakes in companies in order to influence how they are managed (please note that this term has nothing to do with political activism). Activist investors often target companies that are undervalued or suffering from poor management. Their strategy is generally to invest in these companies and then push management to take actions that will increase corporate value – such as enhancing shareholder returns, improving the business portfolio, or replacing executives – in order to secure a solid return on investment (source: Mutual Inc).
This particular Singaporean activist happens to be somewhat infamous among businesses in Japan, having gained recognition through its investments in big corporations like Toshiba, Fuji Soft and Sapporo Holdings. As reported by Bloomberg, the investor has consistently shown an “aggressive” attitude towards its Japanese investees, making demands for large-scale business reforms, requesting executive resignations and placement of external directors, and publicly criticizing poor management decisions.
Sentaku magazine quotes a company head as calling 3D’s demands “heart-wrenchingly extreme” and a securities firm executive as calling the fund “the most dynamic and feared activist in Japan.” It might be worth mentioning that this reputation is from the businesses leaders’ perspective, not the consumers’ perspective.
How relevant is this for Square Enix, though? Reuters mentions that 3D will be offering advice and “significant” proposals to its management depending on the circumstances, but the extent of their influence is still unclear. 3D acquired a major stake in Square Enix as of April 21, but even way before that, the latter has been putting into motion big changes in face of declining performance, including its new mid-term management plan and reformed management structure.
Related Article: Square Enix reports 9.9% drop in game sector operating profit despite strong sales of Final Fantasy XIV Dawntrail and Dragon Quest III HD-2D Remake
