Dissidence Declared & Directors Denounced

In a strongly worded statement, Singapore-based hedge fund 3D Investment Partners has called on shareholders of Nippon Steel to reject the reappointment of President Tadashi Imai & Vice Chairman Takahiro Mori. The firm raised alarms over corporate governance lapses, a chronic conglomerate discount, & an opaque capital allocation strategy, asserting that these factors are jeopardising long-term shareholder value.

PBR Paradox & Persistent Price Plunge

Despite its stature as one of the world’s top steelmakers, Nippon Steel trades at a paltry price-to-book ratio (PBR) of 0.5x. According to 3D’s analysis, this valuation deficit stems from a long-ignored conglomerate discount & a reluctance to divest underperforming listed subsidiaries. The company’s refusal to provide quantitative justification for retaining these assets has only deepened investor scepticism.

Monumental Misjudgments & Market Misgivings

The focal point of 3D’s critique is Nippon Steel’s colossal capital investment blueprint, reportedly totalling 10 trillion yen (approximately $64 billion). This figure includes the high-profile $14.1 billion acquisition of U.S. Steel, additional investments in its American counterpart, & extensive decarbonization expenditures. 3D warns that these outlays could cause irreversible damage to corporate value if left unchecked & unaccountable.

Governance Gridlock & Glaring Gaps

3D has lamented its unsuccessful attempts to engage Nippon Steel’s top brass. While meetings were held with executive officers & the IR department, repeated requests to meet the Chairman, President, & external directors were rebuffed. This lack of transparency & accountability is, according to 3D, emblematic of deeper governance deficiencies plaguing the firm.

Capital Chaos & Conglomerate Conundrums

At the heart of the capital discipline debate lies Nippon Steel’s continued ownership of subsidiaries like NS Solutions Corporation. These units contribute heavily to the conglomerate discount, yet the company has failed to offer a data-driven rationale for their retention. This, 3D claims, reflects irrational capital misallocation & managerial inertia, exacerbating investor unease.

American Acquisition & Anticipated Anxieties

The acquisition of U.S. Steel has triggered widespread concern. Apart from the steep price tag, analysts are wary of additional $14 billion in planned investments. Compounding matters, reports indicate that the U.S. government may hold a “golden share” in U.S. Steel, granting it veto powers over critical corporate decisions. This could limit restructuring options in times of crisis, increasing the risk of value erosion.

Ecological Expenditure & Economic Enigma

While the decarbonization agenda may appear forward-thinking, 3D criticises Nippon Steel for failing to disclose expected returns or strategic outcomes. The projected expenditure, originally estimated at 4–5 trillion yen, is now expected to balloon further. The absence of concrete financial projections for these green investments has intensified fears of future fiscal strain & value impairment.

Reform Recommendations & Responsibility Reallocation

3D has proposed a two-pronged reform agenda: a market check on the sale of NSSOL to address the conglomerate discount & a shareholder vote on the U.S. Steel acquisition. Both proposals were rejected by Nippon Steel. As a result, 3D holds Mr. Imai & Mr. Mori directly responsible for the firm’s deteriorating capital discipline & governance architecture. It has issued a clarion call for shareholders to oppose their reappointment at the upcoming Annual General Meeting.

Key Takeaways

• 3D Investment Partners urged shareholders to vote against Nippon Steel’s President & Vice Chairman.

• The firm criticised a 10 trillion yen ($64 billion) investment plan, including the $14.1 billion U.S. Steel acquisition.

• Governance issues, conglomerate discount, & lack of capital allocation discipline remain key concerns.