Activist Investors After Listing: Preparing the Board

Activist investors in Hong Kong are less common than in the US but are an increasing presence, particularly targeting companies trading below book value or holding significant cash balances. The activist playbook typically involves: acquiring a 5-10% stake, issuing an open letter to the board demanding specific changes (share buybacks, dividend increases, asset sales, board refreshment), and if rebuffed, calling an EGM to propose board changes. The board’s defence begins long before any activist appears: maintaining an active shareholder engagement programme so the board understands which shareholders are potentially dissatisfied, regularly reviewing the company’s capital allocation strategy (if cash is sitting idle, be able to explain why), and ensuring the board composition includes directors with relevant industry and financial expertise who can credibly defend the strategy. When an activist does appear, the cardinal rule is: engage, don’t ignore. An ignored activist becomes a louder activist.