Poison pills: one more reason to avoid Korea

published 12 November 2009

Korea is already famous as one of the least shareholder-friendly markets. Now investors' rights look set to take another blow, as the government mulls a daft plan to allow firms to set up 'poison pill' defences.

The 'poison pill' tactic allows a company to fight off hostile takeovers by giving existing shareholders the right to buy large numbers of new shares cheaply. The effect is to dilute hugely any stake that a bidder may try to build up.

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Take US private equity firm Lone Star, which picked up a controlling stake in Korea Exchange Bank in the aftermath of the 1997-1998 Asian financial crisis. Last year, Lone Star attempted to sell the stake to HSBC. The deal would never happen, I heard at the time. Sure enough, HSBC eventually gave up after regulators kept delaying approval. Only a Korean buyer - probably Kookmin Bank - is ever likely to get clearance.

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.