Increase its stake in NECEAdvantages If
Increase its stake in NECE
Advantages:
If Perry team succeeds in purchasing 25% of NECE directly from the NEC parent, parent shares will be reduced to 45%. In this way, the parent’s controlling stake would be eliminated and Perry’s would be increased meanwhile, which makes it more likely to create an independent Board for NECE. The board would tend to advocate and proceed the restructuring changes. Thus, Perry would be likely to profit from the restructuring and the better market performance of NECE.
Disadvantages:
Even though Perry team could gain more control by increasing its stake in NECE, the deeply-rooted Japanese Kereitsu system would still mitigate Perry’s use of control. As a result, the high proportion of shares cannot guarantee a decent enforceable control rights and restructuring process will still be hardly achieved.
What makes it even worse is that Perry team would bear the great loss due to NECE’s poor market performance especially when Perry has a high stake in NECE.
Very little possibility to proceed the restructuring process and vulnerability to poor market performance won’t make it a good idea for Perry team to increase its stake in NECE.
Sell its position:
Advantages:
Exiting the investment could be “the easiest things to do”. And this way could protect Perry team from more potential loss implied by the NECE’s current poor market performance. Besides, NECE’s reluctance to restructure would be very costly for Perry to maintain its investment.
Disadvantages:
At the very beginning, Perry invested large sums of money in NECE and also identified a large upside in it. Unwinding its position when NECE performs poorly means that Perry would suffer great loss without gaining any profit.
Confront NEC
Advantages:
On paper, NECE had a number of obligations to its minority shareholders which it often failed to executed. Confrontational strategy by way of the courts could be effective in enforcing the obligations NECE had to its minority
Advantages:
If Perry team succeeds in purchasing 25% of NECE directly from the NEC parent, parent shares will be reduced to 45%. In this way, the parent’s controlling stake would be eliminated and Perry’s would be increased meanwhile, which makes it more likely to create an independent Board for NECE. The board would tend to advocate and proceed the restructuring changes. Thus, Perry would be likely to profit from the restructuring and the better market performance of NECE.
Disadvantages:
Even though Perry team could gain more control by increasing its stake in NECE, the deeply-rooted Japanese Kereitsu system would still mitigate Perry’s use of control. As a result, the high proportion of shares cannot guarantee a decent enforceable control rights and restructuring process will still be hardly achieved.
What makes it even worse is that Perry team would bear the great loss due to NECE’s poor market performance especially when Perry has a high stake in NECE.
Very little possibility to proceed the restructuring process and vulnerability to poor market performance won’t make it a good idea for Perry team to increase its stake in NECE.
Sell its position:
Advantages:
Exiting the investment could be “the easiest things to do”. And this way could protect Perry team from more potential loss implied by the NECE’s current poor market performance. Besides, NECE’s reluctance to restructure would be very costly for Perry to maintain its investment.
Disadvantages:
At the very beginning, Perry invested large sums of money in NECE and also identified a large upside in it. Unwinding its position when NECE performs poorly means that Perry would suffer great loss without gaining any profit.
Confront NEC
Advantages:
On paper, NECE had a number of obligations to its minority shareholders which it often failed to executed. Confrontational strategy by way of the courts could be effective in enforcing the obligations NECE had to its minority