A coalition of minority shareholders at Lotte Corp. has stepped up pressure on management, calling for the cancellation of all treasury shares held by the holding company of South Korea’s fifth-largest conglomerate in a bid to restore shareholder value.
The company’s minority shareholder alliance, working with local shareholder activism platform Act, said Monday it sent a formal letter to the company’s board demanding sweeping governance reforms, which include the elimination of treasury shares, greater governance transparency and an overhaul of executive pay.
Their campaign comes as Lotte’s stock has slumped in recent years. Shares closed at 29,050 won ($20.76) on Sept. 25, about one quarter of their all-time high of 125,301 won.
As of June, the stock traded at a price-to-book ratio of 0.35, reflecting investor unease over sluggish earnings and failed investments.
A PBR below 1 indicates a company is trading below its net asset value, which can suggest undervaluation but may also indicate weak profitability or fading growth prospects.
TIME TO ACT TO RESTORE VALUATION
The alliance blamed Lotte’s depressed valuation on a series of missteps, including the liquidation of its healthcare business, the costly acquisition of Iljin Materials Co., now Lotte Energy Materials Co., and liquidity strains at Lotte Engineering & Construction Co.
Fueling shareholder anger, Lotte Group Chairman Shin Dong-bin received 21.6 billion won in compensation last year despite the company’s weak financial performance.
In its letter, the coalition outlined eight specific demands, including the cancellation of 27.5% of outstanding shares held as treasury shares, the separate election of audit committee members, the introduction of a performance-based pay system and the creation of a team to improve the share valuation directly under the CEO.
It also urged management to halt financial support for underperforming affiliates, which it said has eroded returns.
“This is not about threatening the company but about restoring damaged shareholder value,” said Park Jong-jin, head of the minority alliance. “Management without shareholders can no longer be tolerated.”
Lee Sang-mok, CEO of Act, added, “When the voices of individual shareholders come together, they can become a driving force for healthy corporate growth. We will provide full technical and procedural support.”
The shareholder group warned it would escalate its campaign if Lotte fails to respond within a week.
It pledged to secure the shareholder registry as of the end of September and prepare for a proxy fight at the 2027 annual general meeting to push for separate election of audit committee members.
As of Friday, 687 shareholders had joined the campaign on the Act platform, representing 839,468 shares, or about 0.8% of Lotte’s outstanding stock, with participation continuing to grow, according to Act.
Shareholder activism in Korea has increased as regulatory reforms and government initiatives to enhance corporate governance have empowered minority investors and underscored the need to improve shareholder value.
Lotte shares ended up 0.7% at 29,150 won on Monday.
By Ye-Jin Jun
ace@hankyung.com
Sookyung Seo edited this article.
