Succession, Korea

A very special situation.

Not investment advice.

The Korean financial press has been tracking a shareholder rebellion at an illiquid KOSDAQ name, and it just escalated into a proxy war.

The family-owned and operated company is deeply embedded in the memory buildout, and the rebels include Korea's most famously patient value investor — a fund built in Buffett's image — and Norway's sovereign wealth fund.

Yet the story is all but invisible in the English press.

That was until Archetype Capital quietly published an investment thesis on it, which I found through MarketStack’s under-the-radar filter in PositionWire.

Note - I’ve verified the story against the Korean financial press, though several details surface only in Archetype’s primary-source work.

Allow me to set the scene.

Imagine you’re a 75-year-old founder. You own 34.8% of a company you started from nothing in 2000. Your two sons work beside you as executives, but they own essentially none of the equity.

Your company has been a qualified supplier to SK Hynix since 2001 and Samsung since 2002. You sell them the replacement parts for the insides of the machines they use to make chips. Roughly 45% of your most recent quarter’s revenue came from those two customers alone.

And every machine that Samsung and Hynix add for the HBM buildout becomes a perpetual customer the day it switches on.

Now consider the Korean tax law. When a parent gifts listed shares to a child, the taxman doesn’t value them at the price on the day of the gift. He takes the average closing price over a four-month window symmetric around the date of the gift, and applies a rate that tops out around 50%.

Everything you spent your life creating passes to your kids through that formula. For one four-month window, at a moment of your choosing, every won of your company’s share price is a direct levy on your family’s fortune.

So you'd want the stock cheap. Not forever. Just until the window closes.

And you have every tool you need. You control the board — three of the four executive directors are you and your sons. You control the dividend — over the last three years the company earned about ₩160bn and paid shareholders ₩3.6bn. A payout ratio of 2.3%. You personally were paid more than all of your shareholders combined.

You let the cash pile up and sit. ₩230bn of it now, against a market value of ₩440bn — the market prices your entire operating business at less than the cash it holds, about 4x its annual profit. Your closest peer earns less than you and is valued at 3x more.

In the middle of the biggest memory expansion in history, your company is priced like it's dying: 9 years of profits buys the whole thing, 4 once you count the cash.

And this is exactly where you want it.

Every ratio a value investor would circle in red is, from where you sit, tax planning.

For years, nobody could do anything about it. With 34.8% voting as a bloc against a scattered register, every AGM was a formality. The low payouts, the family board, the pay rises in down years: none of it was ever voted down, because none of it could be.

Then, in the space of twelve months, three things happened.

A court took away your votes. In April 2025 Korea’s Supreme Court let stand a ruling — in a case involving Namyang Dairy — that a director who is also a shareholder can't vote his own shares even on the company-wide pay ceiling. A technical confirmation of a technical point, waiting for a test case.

Then a buyer took your discount. In July 2025 a value fund called VIP Asset Management — founded in 2003 by two university students out to prove that patient, Buffett-style investing could work in Korea, and famous for never once going to war with a company it owned — crossed the 5% disclosure line in your stock.

Within a year it had built its stake to 15.64%.

The cheapness you engineered didn’t just deter investors. It handed a sixth of your company, at a discount, to the one shareholder in Korea most likely to eventually do something about it.

And then your shareholders got a fair fight — and you lost it. Twice.

The first fight came at the annual meeting in March. You’d read the room enough to withdraw the ugliest item beforehand — a clause entitling directors removed before the end of their term, the classic anti-takeover parachute, to severance of up to 20x their average pay, on top of ordinary retirement pay — and you trimmed the pay-ceiling rise.

It didn’t matter.

With your 34.8% sterilised by the Namyang precedent, the minority holders were, for the first time in the company’s history, the only votes that counted. They killed the proposal, 69.2% against — in the first proxy season the ruling had ever applied.

You could have taken the hint.

Instead you ran the same play again.

The defeated proposal went back, nearly unchanged, to an extraordinary meeting in June — split into pieces this time, so you could vote your stake on your sons’ pay while sitting out only your own. Electronic voting, allowed in March, was switched off.

The meeting was set for a Monday morning in Gumi, the company's factory-town home, an industrial city two-three hours south of Seoul. To vote against you, a shareholder had to physically show up.

They showed up.