(Bloomberg) -- Fuji Media Holdings Inc. has had an abysmal start to 2025.
The broadcaster’s reputation is in tatters as a sexual harassment scandal involving one of its most famous TV hosts has dominated the news in Japan. Advertisers have fled, the company has slashed its earnings forecast, top executives have resigned in disgrace and it has become synonymous with corporate dysfunction, symbolized by a press conference from which television cameras and some media were banned. This was followed by a second briefing that stretched into an unprecedented 10-hour marathon during which journalists grilled management until 2 am.
So it may come as a surprise that the company’s shares have surged 45% this year, making it the best-performing stock on the benchmark Topix index.
The answer for the seeming disconnect is that investors see opportunity in the company’s disarray. In addition to being one of the country’s biggest broadcasters, it boasts prime real estate in Tokyo and Osaka. New leadership is expected to be more accommodating to shareholders and improve the firm’s corporate governance
“Fuji Media has a fascinating array of businesses,” said Richard Kaye, portfolio manager at Comgest Asset Management. “People have been very excited about the opportunity of management change there.”
The catalyst for the crisis at Fuji was a report by a local tabloid in December that a prominent TV host sexually harassed a woman. The star, Masahiro Nakai, acknowledged ‘trouble’ for which he reached an agreement with the alleged victim while saying violence was not involved. He subsequently retired from show business after the story broke.
Rising Sun Management, which is the investment adviser to Nippon Active Value Fund, has been one of the most vocal critics of the company’s handling of the allegations. In a public letter, it called the broadcaster’s initial press conference ‘a virtual car crash’ and demanded the company set up a third-party committee to investigate what happened. NAV and Dalton Investments, which are both managed by James Rosenwald, together are Fuji’s third-largest shareholder.
Rising Sun also called for Hisashi Hieda, a board member of both Fuji Media and Fuji Television, to resign in a letter on Monday.
The rapid run up in the shares has also sparked speculation that other activist investors have targeted the company.
Last year, activists set a record for investing in Japan, making it the world’s second-largest market for the strategy. In all, they bought at least ¥1.2 trillion ($7.7 billion) worth of Japanese stocks, according to data compiled by Bloomberg Intelligence.
Real estate has been a major focus for the activists. Elliott Investment Management took a stake in Tokyo Gas Co. and pushed the company to sell down it property portfolio. Sapporo Holdings Ltd. came under similar pressure from 3D Investment Partners. Real estate is also at the heart of the fight between KKR & Co. and Bain Capital over Fuji Soft Inc.
While Fuji Media is known for its iconic sphere-and-lattice headquarters in the Odaiba district near Tokyo Bay, it also owns office buildings, condominiums, hotels, nursing homes, logistic facilities, resorts and even two aquariums. Now some investors are speculating that it will sell off some of its portfolio to fund share buybacks and dividends.
Additionally, the shares are cheap. They traded at 0.44 times book value at the end of last year compared with 1.45 times book value for the benchmark Topix index, according to data compiled by Bloomberg. The company is also sitting on at least 69 billion yen of unrealized gains in its real estate portfolio, according to Goldman Sachs.
“If there are management changes, then capital costs and stock prices will be more important for them and they could sell assets, such as land, buildings and buy back shares,” said Hiroaki Tomori, executive fund manager at Mitsubishi UFJ Asset Management.
The company has said it will set up an independent inquiry with a report due by the end of March. A spokesperson for Fuji Media did not respond for comment on whether it will sell real estate or make further changes.
Fuji has been protected from the influence of foreign investors because they are legally prohibited from owning more than 20% of a broadcaster. Additionally, Fuji has cross-shareholdings with media companies Toei Animation Co. and Toho Co. as well as Dentsu Group Inc., the country’s largest advertising agency. Traditionally, Japanese corporations use these cross-shareholdings to guarantee friendly shareholders who will support management.
“The moment you start to see something might pressure management to change and remove these really old-styled, entrenched and obstructive management, the moment that becomes a possibility, then the real value of the company’s assets might become realized for shareholders,” said Zuhair Khan, a fund manager at UBP Investments Co. “Up to now it’s been almost impossible.”
(Adds investor demand for executive resignation)