Is it an Activist Campaign or Short-Term Trading Play?

Aozora Bank Ltd., a Japanese lender, had a significant surge in its shares — the most extensive since March 2020 — following a report from a fund linked to activist investor Yoshiaki Murakami. The report disclosed the fund's holdings and indicated that it may present significant proposals.

City Index Eleventh, the fund in question, disclosed a 5.42% stake in the company in a filing to Japan's Finance Ministry on Wednesday. The bank's shares jumped 9.5% in Tokyo, with a peak of 18% during the day's session.

Aozora Bank had been aggressively lending in the US, but due to bad loans tied to properties in the country, it recently experienced its first loss in 15 years. But things are looking up! Arun George, an analyst at Global Equity Research Ltd., who publishes on Smartkarma, thinks that Murakami's disclosure suggests two possibilities: the start of an activist campaign or a short-term trading play.

City Index Eleventh has taken stakes in other Japanese firms in the past, boosting shares on expectations of profitability improvement. However, the fund has not always been successful with its campaigns. Even though Aozora Bank's stock has rebounded about 36% from its three-year low reached on February 16, it is still almost 20% away from recouping its losses this month.

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