Dan Loeb Goes Activist On Sony: Demands Partial Spin Out Of Sony Entertainment, Sees 60% Stock Upsde
Can Sony repeat the magic of the Walkman, the Playstation and the Trinitron? Maybe, maybe not not, and judging by the stock price, soaring recently due to the plunge in the Yen which to many implies a ramp in future profitability (the jury is still out on that), it may not have to. However, activist investor Dan Loeb is not waiting.
In a letter filed overnight, Third Point announced it has accumulated 64 million shares in the one time electronics and entertainment giant, making it the largest single shareholder of Sony. As a result, Loeb has a suggestion which is to partially (15-20%) spin off Sony Entertainment, in which Third Point would backstop a $1.5-$2 billion rights offering, with the resulting liquidity could go to boost Sony Electronics, as well as push off debt into the newly-created entity, reducing leverage at the parent company. Following this, the company could focus on restructuring Sony Eletronics, where Loeb believes there is untapped value, which could be as large as ¥725/share when factoring in for EURJPY moves. End result, Loeb sees 60% upside in Sony stock. We wish him the best of luck: other firms, such as Warren Lichtenstein's Steel Partners attempts to go activist in Japan in the past decade have largely crashed and burned. Perhaps for Loeb, the time of Abenomics will be different.
Full letter below