#Taiwan #Taipei #Catcher Technology #Vasanta Fund #Pagoda Fund

Foreign Investors Advocate for Good Corporate Governance at Catcher Technology

In a significant move reflecting the growing influence of foreign investors, Vasanta Master Fund and Pagoda, two prominent investment funds, have been actively advocating for corporate governance reforms at Catcher Technology, a leading Taiwanese manufacturer specializing in electronic casings. As the company braces for its Annual General Meeting (AGM) slated for May 27, where crucial board elections will take place, the investors' push marks a pivotal moment in Taiwan's investment landscape.

Background of the Investors

Vasanta Master Fund, headquartered in Singapore, initially began investing in Catcher Technology in 2021. With Pagoda joining forces, the two funds collectively hold over 1% of the company's outstanding shares. Their strategic involvement symbolizes a daring initiative, as they engage in Taiwan's first-ever foreign shareholder activism, raising critical issues surrounding investor rights and corporate accountability.

Concerns Over Governance

The investors have voiced several concerns regarding the governance practices at Catcher Technology. They perceive a significant portion of capital as underutilized on the company’s balance sheet, particularly in light of Catcher's divestiture from its iPhone casing business in 2020 and the sale of a major production facility in Suzhou in 2021. According to analyses conducted by Vasanta and Pagoda, a staggering 80% of Catcher's assets consist of cash and marketable securities, primarily in US government treasuries. This situation raises alarming questions about inefficient capital deployment and the strategies for long-term growth.

In an attempt to assert their influence, Vasanta and Pagoda proposed a shareholder initiative in 2023 that aimed to provide investors the right to suggest cash dividends. This proposal, characterized as a groundbreaking move by foreign stakeholders in Taiwan, encountered resistance from the Catcher board, which deemed it illegal and subsequently rejected it. As a result, the proposal was not included on the agenda for voting during the 2023 AGM.

Administrative Challenges

Following the rejection, Vasanta took steps to file complaints with Taiwan's Financial Supervisory Commission (FSC) and other relevant authorities. Despite these efforts, navigating the legal landscape proved arduous, with limited remedies available for shareholders seeking to rectify the situation and allow voting on the proposal during the 2023 AGM. Alongside these challenges, Vasanta faced increased scrutiny, as regulatory bodies demanded details regarding the ultimate beneficial ownership of any investor stake exceeding 1%. Simultaneously, Catcher's board initiated criminal defamation proceedings against a representative of Vasanta, although the case was ultimately dismissed by prosecutors due to a lack of evidence.

In a further blow to Catcher, in August 2023, the FSC imposed a fine of NT$240,000 on the chairman for procedural violations regarding shareholder rights, signaling rising trepidations surrounding governance practices at the firm.

Recent Developments and Support for Shareholder Rights

In 2024, the same proposal aimed at granting cash dividend proposal rights to shareholders was resubmitted. This time, it garnered backing from prominent global proxy advisory firms ISS and Glass Lewis, achieving 30.37% support during the vote. Despite this, the endeavor ultimately failed, as 39.55% of shareholders voted against the measure, illustrating a complex interplay of support and resistance among stakeholders.

Investor scrutiny escalated in July 2024 when it surfaced that Catcher's chairman and several family members were under investigation for potential insider trading related to a share buyback announcement. This revelation further fueled governance concerns among shareholders and invigorated discussions about the pressing need for board oversight reforms.

Looking Ahead to the 2025 AGM

With the 2025 AGM approaching, Vasanta and Pagoda have nominated candidates for four out of seven board seats, strengthening their push for governance reforms. However, both investors now find themselves under investigation by the FSC, leading regulators to reassess previous questions regarding the origins of their investment capital, particularly regarding potential ties to mainland China. Both Vasanta and Pagoda have maintained that they have adhered to all disclosure requirements throughout the ongoing investigations.

As the situation unfolds, the actions taken by these foreign investors could have far-reaching impacts on not only Catcher Technology's governance practices but also the broader landscape of corporate accountability and shareholder rights in Taiwan.