GungHo vs. Strategic Capital (2025): Activist Proposal & Governance
Sep 28, 2025UP!
This article analyzes the 2025 GungHo battle. We examine, in addition, Strategic Capital’s campaign strategies.
Overview of GungHo vs SC Conflict
Conclusion: The 2025 confrontation is a landmark case. It shows shareholder rights effectiveness. New governance standards emerged as a result.
Background of the Conflict
GungHo faced a challenge in 2025. The company makes “Puzzle & Dragons.” Activist investor SC challenged management, however.
This was not just a corporate dispute. It tested shareholder rights rather. It became a crucial case therefore.
Why This Case Matters
This case attracted attention. There are three key reasons indeed.
Legal measures were fully used first. Defense strategies were tested second. Governance needs became visible third. ITmedia report
Timeline and Critical Phases
Conclusion: SC intensified pressure gradually. This occurred from January to September 2025 consequently. GungHo implemented countermeasures meanwhile.
Major Conflict Phases
SC’s offensive lasted long. Shareholder rights need processes because. Let’s examine the timeline therefore.
| Date | Event | Significance |
|---|---|---|
| 2025/1/29 | SC announced proposals | Campaign launch |
| 2025/2/14 | GungHo opposed (PDF) | Conflict official |
| 2025/7/23 | SC requested meeting (PR Times) | Forced demand |
| 2025/8/14 | Embezzlement disclosed (PDF) | Governance failure |
| 2025/8/15 | Meeting announced (Notice) | Legal compliance |
| 2025/8/26 | SC launched site (PR Times) | PR strengthened |
| 2025/9/24 | Meeting held | Split result |
Strategic Decisions
SC’s Pressure Strategy
SC tested shareholder support first. They challenged management next. They shaped opinion finally.
GungHo’s Defense
GungHo remained defensive meanwhile. They opposed all proposals. They disclosed fraud furthermore. This showed commitment as a result.
[Expert Comment ①: Preparation was key indeed.]
Why SC Targeted GungHo
Conclusion: GungHo had three characteristics. These were abundant reserves moreover. It became an ideal target consequently.
Three Target Conditions
Activists have clear criteria. GungHo met conditions therefore.
① Decreased Capital Efficiency
Dormant capital was GungHo’s problem. The company earned huge cash flow. It came from “Puzzle & Dragons” indeed.
They didn’t return money however. Dividends were low. Reserves accumulated as a result.
SC’s Philosophy Match
This aligns with SC’s philosophy. SC targets dormant capital companies. GungHo was typical therefore.
② Rising Compensation
Compensation increased. Performance declined meanwhile. This invited distrust naturally.
Unexplained raises signaled failure. SC criticized strongly therefore.
③ High Voting Effectiveness
GungHo had no controlling shareholder. Independence grew in the 2020s. No parent held over 30-40% consequently.
Free float was high additionally. Individual investors owned large stakes. Proposals had more influence as a result.
Perfect Philosophy Alignment
SC advocates dialogue. They avoid force therefore. They pressure reluctant companies however.
GungHo’s structure showed potential. Intervention opportunities existed in other words.
Conflict Core: Compensation Issues
Conclusion: Morishita’s pay increased 2.7 times. Performance decreased 32% however. A 300M yen fraud occurred furthermore.
Compensation Figures
Let’s examine the numbers. Here is Morishita’s compensation indeed:
| Year | Amount | Change |
|---|---|---|
| 2014 | 121M yen | – |
| 2023 | 341M yen | +182% |
| 2024 | 329M yen | -3.5% |
The Performance Gap
This is a 2.7 times increase. Net income declined significantly meanwhile.
It was 16.4 billion in 2023. It dropped to 11.2 billion in 2024 however. A 32% decrease occurred in other words.
This supported SC’s claims. The criticism had legitimacy indeed. Management had accountability therefore.
Embezzlement Incident
The Shocking News
GungHo announced fraud on August 14, 2025. A former executive embezzled 346 million yen. Timing was terrible moreover.
What It Revealed
This proved SC’s concerns. Controls weren’t working in other words.
Checking systems failed furthermore. Responsibility was questioned as a result. Succession issues complicated matters however.
Shareholder Rights Mechanisms
Conclusion: SC exercised two powerful rights. GungHo’s articles created barriers however.
Two Key Rights
We explain SC’s rights. These come from the Companies Act indeed.
① Proposal Rights
This right requires holdings. These conditions apply specifically:
- Hold 1%+ of voting rights
- Hold 300+ voting rights alternatively
- Continuous 6-month+ holding
SC made regular proposals initially. Management opposed them however. They escalated therefore.
② Meeting Convocation Rights
This is more powerful. Requirements are stricter however.
- Hold 3%+ of voting rights
- Continuous 6-month+ holding similarly
SC held 8.5% of shares. They exercised this right consequently. Management couldn’t refuse as a result.
Dismissal Requirements
The Articles Strategy
GungHo had a defense however. This was raised dismissal requirements.
| Item | Companies Act | GungHo Articles |
|---|---|---|
| Quorum | Majority attendance | Same |
| Approval | Majority votes | Two-thirds+ votes |
| Type | Special ordinary | Special |
Why This Worked
The law requires ordinary resolution. GungHo required special resolution however. Two-thirds became necessary as a result.
This protected management. Two-thirds is harder indeed. SC couldn’t win therefore.
Meeting Results
Conclusion: Articles amendment passed. CEO dismissal failed however. This was SC’s strategic victory indeed.
Two Proposal Results
The meeting occurred on September 24. Results were clear:
- Proposal 1 (Articles): Approved consequently
- Proposal 2 (Dismissal): Rejected however
This isn’t just a split. It shows complex judgment rather.
Amendment Significance
Proposal 1 approval is crucial. There are three significances indeed:
① Future Changes Easier
Requirements changed from special to ordinary. This is permanent reform in other words. Majority now suffices consequently.
② Shareholder Proactiveness
Shareholders dismantled defenses. They strengthened accountability furthermore. This symbolizes changes therefore.
③ Reform vs Personnel Split
Shareholders agreed to reform. They were cautious personally however. “Change rules, not people” in other words.
SC’s Achievements
Key Victories
CEO dismissal failed. SC achieved objectives however:
① Institutional Reform
Rights strengthened permanently indeed.
② Warning Effect
Morishita received a warning. Improvement is expected therefore.
③ Discussion Activation
Broad discussions emerged. Reform momentum increased consequently.
Fraud Impact
Two-Sided Effects
Embezzlement had complex impacts. It helped and hurt SC indeed.
Helpful aspects:
It proved vulnerability. Deficiency became clear furthermore.
Harmful aspects:
Management disclosed it willingly. This signaled intent therefore. Some gave them chances as a result.
Implications and Lessons
Conclusion: This case shows three lessons. These are disclosure strategy moreover.
Target Characteristics
Three conditions emerge indeed.
Three Warning Signs
① No Controlling Shareholder
No parent holds over 30-40%. Proposals pass easily consequently.
② Governance Doubts
Performance-compensation gaps exist. Improvement potential is high therefore.
③ Rights Restrictions
Raised requirements exist. This invites criticism however.
Three Executive Lessons
Three points are crucial indeed:
① Disclose Issues
Disclosure timing was poor. Posture was valued however. Concealing creates damage. Early disclosure restores trust therefore.
② Avoid Excessive Defense
Requirements protected management temporarily. Backlash followed ultimately however. Reform was forced as a result.
③ Build Dialogue Early
Rejection intensified conflict. Early dialogue helps in fact. Constructive solutions emerge consequently.
Governance Implications
Three Key Trends
Three points emerge indeed:
① Shareholder Activation
Diverse shareholders engage actively. This includes individuals moreover.
② Defense Reconsideration
Excessive defense loses support. Reconsider appropriateness therefore.
③ Transparency Importance
Failing accountability loses trust. Transparency is demanded consequently.
Summary: Key Takeaways
A Modern Governance Case
The conflict shows challenges. Results demonstrate maturity indeed. Balance prevailed in other words.
Shareholders agreed to reform. They stayed cautious personally however.
Clear Executive Lessons
Lessons are clear. Don’t hide failures first. Don’t overuse defense second. Emphasize dialogue third.
Investor Importance
This matters for investors. Rights are protected legally. Companies Act rights work indeed. Dialogue determines outcomes however.
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