Toyota's New Share Plan Faces Proxy Adviser Opposition

Toyota Motor Corp.'s plan to issue up to ¥500 billion ($4 billion) of a new kind of stock is facing a challenge by a proxy adviser, though analysts say the plan likely will be approved at a shareholders' meeting next month.

Institutional Shareholder Services Inc. opposes issuance of the new shares, which Toyota has said is aimed at attracting long-term individual investors. Such a move would make the auto maker's capital structure more complicated, the proxy adviser said in a report this week.

Toyota hasn't offered specifics on how the move would benefit common shareholders, ISS said, adding that such a share issuance would "lead to an increase in the number of silent stable shareholders."  

Despite ISS's opposition, the resolution on share issuance likely will pass when shareholders vote on the plan at Toyota's annual meeting on June 16, because of the backing from major shareholders including Toyota's group companies, analysts said.

ISS's move likely will raise questions about the closeness of company executives and major shareholders in Japan, which makes it more difficult for foreign shareholders to have a voice, said Koji Endo, an analyst at Advanced Research Japan.

Toyota spokesman Itsuki Kurosu declined to comment on the matter.

Toyota shares barely moved Friday on the news of ISS's opposition, first reported by the Nihon Keizai Shimbun business daily. Toyota's shares on the Tokyo exchangeclosed down 0.4% on Friday.

Toyota said last month that the new class of shares won't be listed but will come with voting rights. After five years, holders will be able to convert the shares into common stock or sell them back to Toyota at the issue price. To prevent dilution of the value of existing equity, Toyota plans to buy back around the same number of common shares.

Group companies are among Toyota's biggest shareholders—Toyota Industries Corp. holds around 6.5% and Denso Corp. holds about 2%. Foreign investors hold around 30% of Toyota shares, while around 10% are held by individual shareholders.

Write to Yoko Kubota at [e-mail]

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