Fast reading
- The small price differentials at which stock classes with differing voting rights trade at on US stock markets shows that investors don’t place a high value on greater voting power even in a market where greater voting power might result in better treatment in the event of a takeover.
- Korean preference shares are essentially non-voting common stock. Unlike in the US, minority stockholders – even in share classes with voting rights – enjoy no ‘tag along’ rights in the event of a takeover, implying the value of a vote should be even less than that which applies in the US.
- Despite this, Korean preference shares trade at remarkably deep, persistent discounts to their voting counterparts. These instruments become particularly attractive under specific circumstances.
The curious case of Korea’s preference stock
For more on this topic, please read our previous coverage:
- Asia ex-Japan Equity: Letter to Investors (South Korea – enough is enough)
- The unpersuadables?
- Korea Discount: a dream deferred
For further insights on Asia ex-Japan Equity please click here.
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