From Seekingalpha · Blue Tower Asset Management, LLC · · 3m
Blue Tower Asset Management Q3 2026 Letter
Blue Tower reveals Enova merger collapse and South Korea's value opportunity.
In brief
Blue Tower reveals Enova merger collapse and South Korea's value opportunity. Blue Tower reports Enova abandoned Grasshopper Bank merger due to regulatory delays, while South Korea's governance reforms create value opportunities for investors. Originally reported by Seekingalpha.
Q3 Performance
Blue Tower's Global Value composite achieved 0.54% net performance (0.83% gross) for Q3 2026, with year-to-date net performance at 21.50% (22.50% gross).
Enova-Grasshopper Merger
Enova abandoned its merger with Grasshopper Bank after regulatory delays, paying $4 million in a mutual termination agreement on October 16, 2026.
Regulatory Opposition
20 state and district attorneys general raised concerns about Enova's merger potentially circumventing state usury laws by exporting interest rates nationwide.
Market Reaction
Enova shares fell 23.4% on September 15, 2026, from $226.72 to $173.61, erasing $1.3 billion market value.
Enova's Performance
Enova's Q2 2026 revenue grew 22% year-over-year to $929 million, with originations up 27% to $2.3 billion.
South Korea Opportunity
Blue Tower identifies South Korea's governance reforms as a catalyst for value opportunities in equities after years of low shareholder returns.
Korea Discount
South Korean stocks trade at a discount due to poor corporate governance, chaebol crossholdings, inheritance tax issues, and low shareholder returns.
Governance Reforms
South Korea's 2025 Commercial Code amendments require directors to prioritize shareholder loyalty, with 3% vote caps for controlling shareholders and mandatory cumulative voting.
Small Caps Opportunity
KOSDAQ small caps offer value opportunities due to retail investor dominance, limited analyst coverage, and improved English disclosure requirements.
Market Rallies
KOSPI rose 75.6% in 2025 and doubled to 9,114.55 on June 22, 2026, driven by Samsung Electronics and SK Hynix.
Blue Tower's Strategy
Blue Tower targets high-quality businesses with durable competitive advantages and strong shareholder returns in South Korea's emerging market.
Shareholder Returns
South Korea's shareholder payouts were 28% for the decade ending 2021 versus 89% for the US, with reforms improving returns.
Korea Discount Causes
Poor corporate governance, chaebol crossholdings, inheritance tax issues, and low shareholder returns created the Korea discount.
Korea Discount Impact
63.5% of KOSPI companies traded below book value as of April 2026, compared to Japan's TSE Prime Market before reforms.
Dividend Tax Reform
Reforms allow companies paying at least 40% of earnings to qualify for a top 30% dividend tax rate, with 617 companies adopting this treatment in 2026.
Shareholder Proposals
218 shareholder proposals were filed at 56 companies during 2026 annual meetings, a 44% increase from the prior year.
What to remember
Blue Tower reports Enova abandoned Grasshopper Bank merger due to regulatory delays, while South Korea's governance reforms create value opportunities for investors.
