HONG KONG, (Reuters Breakingviews) - Call it crypto-activism. Fresh from several campaigns in Japan, Hong Kong hedge-fund manager Oasis wants to reform GMO Internet . For most of the proposals, the chances of success appear as virtual as the crypto-currencies the Tokyo-listed company now mines. Yet this could still prompt a juicy revaluation of the $2 billion target.

The campaign highlights an odd entity. GMO is like a smaller version of Japanese technology giants SoftBank and Rakuten. It too boasts a maverick founder, Masatoshi Kumagai, with an eclectic range of business interests – as reflected by the company's eight listed subsidiaries dabbling in everything from electronic payments and cloud computing to internet advertising.

But GMO is closer to Japan’s many armchair investors, often known jokingly as “Mrs Watanabe”. Unit GMO Financial Group, for example, says it is the world’s largest retail currency broker. The parent has pushed into crypto-currency mining and is preparing to raise funds through a so-called “initial coin offering”.

On paper, Oasis’ case is good. It says takeover defences shield bosses from market discipline. It notes the target is worth less than its $2.6 billion of subsidiary holdings and it calls for sensible governance upgrades, including an independent chairman and more Western-style board committees.

Although investors will get to vote the six proposals in March, four are non-starters. They require changes to the articles of association, which can be vetoed by one-third of voting shares - and Kumagai owns nearly 41 percent. Moves to scrap a poison pill and cap directors’ pay only need a simple majority but this will still require both a high turnout and a widespread rebellion.

Perhaps that does not matter. A big protest vote, even if unsuccessful, could still pressure Kumagai’s team to up their game in other ways. Analysts reckon GMO is on track for a 15 percent EBITDA margin this year, Eikon data shows. That could surely be improved: the comparison is inexact, but portal operator Yahoo Japan achieves a margin closer to 27 percent.

Often a pushy shareholder can get results merely by turning the spotlight on an obviously undervalued outfit, prompting other investors to reassess their opinions too. For the Hong Kong activist, this could still prove more than a token victory.

CONTEXT NEWS

- Hong Kong hedge fund firm Oasis Management on Jan. 18 said GMO Internet was undervalued and criticised it as a company with “weak governance”, where founder Masatoshi Kumagai wielded “excessive control”.

- Oasis says it owns more than 5 percent of Tokyo-listed GMO, which has a market value of about $2 billion.

- GMO’s interests span online advertising, internet services such as web-hosting and domain registration, and financial businesses such as online foreign-exchange trading. In December, it launched a crypto-currency mining business.

- Oasis proposed six items for GMO’s annual general meeting in March. It wants to abolish an anti-takeover measure; cap directors’ pay; require an independent chairman; create Western-style board committees for executive nomination and compensation; and introduce so-called “cumulative voting”, which would make it easier for outside shareholders to appoint directors.

- A GMO spokeswoman told Reuters the company had no immediate comment. Shares in GMO rose 4.7 percent on Jan. 19, to 2,002 yen per share.

(Editing by Una Galani and Sharon Lam)

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