Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>The recent rise in stock prices may lead to more equity financing, and this could pressure stock prices as companies announce that their shares are overvalued.</li>
<li>If the decision to pursue equity financing was based solely on the surface-level cost of issuing convertible bonds, it would mean the company has learned nothing since the bubble economy.</li>
<li>After CB issuance, the stock price will be driven by trading activity among call option holders. Furthermore, depending on which investors receive the potential shares, this may also impact management.</li>
</ul>


The recent rise in stock prices may lead to more equity financing, and this could pressure stock prices as companies announce that their shares are overvalued.
If the decision to pursue equity financing was based solely on the surface-level cost of issuing convertible bonds, it would mean the company has learned nothing since the bubble economy.
After CB issuance, the stock price will be driven by trading activity among call option holders. Furthermore, depending on which investors receive the potential shares, this may also impact management.


Now, with Stock Prices Rising, It's Time to See if Companies Truly Learned About the Cost of Capital

<ul>
<li>Activist investors' approaches can be categorized as follows: (1) governance-focused approaches, (2) M&amp;A-focused approaches, (3) balance sheet-focused approaches, and (4) business operations-focused approaches.</li>
<li>The “TSE request” and the third revision of the Corporate Governance Code have brought cash allocation into sharp focus, making (3) the balance sheet approach a major point of attention.</li>
<li>Given the low capital profitability, reviewing their business portfolios is essential, yet most companies have yet to address this. Going forward, activist investors will adopt either approach (2)  or (4).</li>
</ul>


Activist investors' approaches can be categorized as follows: (1) governance-focused approaches, (2) M&amp;A-focused approaches, (3) balance sheet-focused approaches, and (4) business operations-focused approaches.
The “TSE request” and the third revision of the Corporate Governance Code have brought cash allocation into sharp focus, making (3) the balance sheet approach a major point of attention.
Given the low capital profitability, reviewing their business portfolios is essential, yet most companies have yet to address this. Going forward, activist investors will adopt either approach (2)  or (4).


Now Investors Can Communicate with Company Managers in Common Language, Deep Discussions Will Follow

<ul>
<li>In 2025, increased buying by overseas investors resulted from correcting underweight positions in Japanese stocks. However, compared globally, challenges remain that few companies offer superior capital profitability and growth potential.</li>
<li>For further buying of Japanese stocks, more companies must emerge where capital profitability and growth potential show significant upside, despite not yet delivering results that enhance corporate value.</li>
<li>Overseas investors' net buying may have increased the foreign ownership, and due to the effects of overseas investor engagement, companies showing management changes will likely emerge in 2026 as well.</li>
</ul>


In 2025, increased buying by overseas investors resulted from correcting underweight positions in Japanese stocks. However, compared globally, challenges remain that few companies offer superior capital profitability and growth potential.
For further buying of Japanese stocks, more companies must emerge where capital profitability and growth potential show significant upside, despite not yet delivering results that enhance corporate value.
Overseas investors' net buying may have increased the foreign ownership, and due to the effects of overseas investor engagement, companies showing management changes will likely emerge in 2026 as well.


Foreign Investors' Net Buy in 2025 May Lead to Companies Showing Management Changes Emerging in 2026

<ul>
<li>Relying solely on management's self-help efforts to raise capital profitability yields no tangible results. Therefore, going private is expected to be the most direct path to enhancing corporate value.</li>
<li>When the risk of company proposals being rejected at AGM is low, management becomes less motivated to implement improvements.A change in shareholder composition can serve as a catalyst for change.</li>
<li>In mutual funds modeled after activist funds by asset managers, making shareholder proposals is unlikely, and questions remain on proxies would be exercised. This depends on effectiveness of “remora” approach.</li>
</ul>


Relying solely on management's self-help efforts to raise capital profitability yields no tangible results. Therefore, going private is expected to be the most direct path to enhancing corporate value.
When the risk of company proposals being rejected at AGM is low, management becomes less motivated to implement improvements.A change in shareholder composition can serve as a catalyst for change.
In mutual funds modeled after activist funds by asset managers, making shareholder proposals is unlikely, and questions remain on proxies would be exercised. This depends on effectiveness of “remora” approach.


Change in Shareholder Composition Acts as Catalyst for Shifts in Mindset To Management Improvement

<ul>
<li>The number of companies going private is gradually increasing, but they still represent a minority. Going private requires a decision and a relatively large amount of capital for that company.</li>
<li>Given slow improvement in capital profitability among listed companies, companies are expected to be asked to explain cash allocation. Identifying growth opportunities and investing in them also requires decisive action.</li>
<li>While the TSE hesitates to make the bold decision to reduce the number of listed companies, improving market quality requires the help of investors.</li>
</ul>


The number of companies going private is gradually increasing, but they still represent a minority. Going private requires a decision and a relatively large amount of capital for that company.
Given slow improvement in capital profitability among listed companies, companies are expected to be asked to explain cash allocation. Identifying growth opportunities and investing in them also requires decisive action.
While the TSE hesitates to make the bold decision to reduce the number of listed companies, improving market quality requires the help of investors.


Unable to Make Decisions and Postponing Matters Is Why Market Quality Can't Be Improved More Quickly

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

Now, with Stock Prices Rising, It's Time to See if Companies Truly Learned About the Cost of Capital

I would like to discuss the issues on the Nikkei article dated December 22nd titled “Market Unmoved by ‘Zero Interest Rates’—JVC Kenwood Shares...

Metrical Inc

Now Investors Can Communicate with Company Managers in Common Language, Deep Discussions Will Follow

I would like to discuss the issues on the December 22 Nikkei article titled “Signs of ‘Activist Investor Hell’: Funds Also Face Difficulties.”

Metrical Inc

Foreign Investors' Net Buy in 2025 May Lead to Companies Showing Management Changes Emerging in 2026

I'd like to discuss the December 18 Nikkei article, “Foreign Investors Net Buy 5 Trillion Yen of Japanese Stocks; 2025 Expected to See Largest...

Metrical Inc

Change in Shareholder Composition Acts as Catalyst for Shifts in Mindset To Management Improvement

I would like to discuss the Nikkei article on December 17, “TOBs in 2025 to Hit Record High with Number and Value Surpassing First 10 Trillion Yen...

Metrical Inc

Unable to Make Decisions and Postponing Matters Is Why Market Quality Can't Be Improved More Quickly

I would like to discuss the issues on the December 16 Nikkei article titled “124 Companies Delisted, Highest in Two Consecutive Years; Companies...

Metrical Inc