Risks of Shareholder Perks

The Japanese stock market has a shareholder perk system that is rare globally. Companies send assortments of their own products, partly to promote them.

Railway companies distribute free tickets, while restaurant chains provide discount coupons or free meal vouchers to shareholders. Some companies also send cash vouchers or catalog gifts instead of just their own products.

It became well-known after Mr. Kiritani, a former professional shogi player, made headlines for living solely off these perks.

Unlike dividends, they feel like small gifts and are popular among individual investors, many of whom buy stocks specifically for the perks.

This likely benefits companies as well by broadening their base of individual investors.

However, you must be careful because there are entities that take advantage of this.

I am recording this in an article because such cases might increase in the future. It is a relatively well-known story in the investment community, so it is worth remembering.

There is a restaurant company called Skylark. It is a major family restaurant chain that operates brands such as Gusto, Bamiyan, and Jonathan's.

You probably remember it from when you were in elementary school. I recall that they were the first to introduce the drink bar, which is now common in family restaurants.

Skylark-affiliated stores are numerous and are often seen on suburban roadsides.

Along with McDonald's Japan, the company is popular among individual investors for its shareholder perk vouchers that can be used at its restaurants. Such perks are more convenient the more locations they can be used at.

There was a period when Skylark was acquired by a foreign investment fund.In 2017, some time after being acquired by this fund, the company's shareholder perks were suddenly tripled.

Naturally, individual investors were pleased, and it seems some became shareholders because of it.However, just three years later in 2020, they reduced the perks by 30% to 50%.

During this period, the company's stock price rose by over 30%, and the fund sold off its shares during that time.

I do not know if this fund lured individual investors with shareholder perks in order to sell off at a high price.

However, as a matter of fact, the stock price plummeted by 40% immediately after the reduction of the shareholder perks. It only returned to the price level of that time recently, amidst a stock market boom.

Admittedly, there were articles and blogs at the time that expressed doubts and issued warnings about the significant shareholder perks.

However, individual investors who were lured by the immediate perks without reading such information ended up handing profits to the fund (it is said that the company made hundreds of billions of yen in profit from Skylark)

If you ever invest with the goal of getting shareholder perks, you need to keep these things in mind and at least understand the capital relationships and performance of the companies you invest in.

This applies not only to shareholder perks but also to cases where dividends are unusually high.

It is foolish to focus only on the easy, short-term gains of shareholder perks and invest without basic knowledge, so one should be careful.

Among novice investors, there are suckers who invest without even looking at basics like business performance, which is no different from falling for an investment scam.

By the way, according to an article by Nikkei Inc. on June 11, the fund in question plans to invest 5 trillion yen in Japan over the next five years. This is reportedly double the amount from the past five years, and the reason is that the market is expected to offer higher returns than those in the US or Europe.

Since we know there are foolish individual investors at Skylark, it is possible that something similar could happen.

This means there is a possibility that someone in Japan will be left holding the bag for 5 trillion yen.

Speaking of five years from now, you will be an adult by then, so you could invest if you wanted to. You need to be careful, because if you invest lured by short-term gains without studying properly, you might end up as fodder for foreign funds.

These types of foreign funds used to be called vulture funds. Domestic active funds that repeat comments about lowering indices with mediocre returns start to look cute in comparison.

*The information posted is not intended for investment solicitation. Trading financial products such as stocks or real estate carries the risk of loss.

The articles posted are written as a personal hobby, and the information provided may not be appropriate for all readers. Furthermore, there is no guarantee regarding its truthfulness, completeness, accuracy, or timeliness for any specific purpose. Please make all investment decisions at your own discretion and responsibility. I cannot be held liable for any losses incurred.