This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sony Jumps as Loeb Lifts Stake

NEW YORK ( TheStreet) -- Sony (6758.TO) shares gained 3.52% to $21.45 in Japanese trading after Third Point, a New York-based hedge fund, raised it's stake in the electronics giant.

Third Point's stake in the Tokyo-based company is now 70 million shares, beefed up from 64 million, and is valued at $1.4 billion. This makes Third Point one of Sony's largest shareholders.

Daniel Loeb, portfolio manager of the $13 billion fund, proposed in a letter obtained by TheStreet, that the company spin off its entertainment sector. Loeb suggests that by spinning off 15% to 20% of the entertainment division in an initial public offering, Sony will see an increase in capital and a successful revitalization. He offered to up his existing share in Sony to 6.9%, giving the company a $1.5-$2 billion backing if the move was completed.

"By issuing rights for cash and partially spinning off Sony Entertainment, the parent company would not only receive meaningful liquidity to inject into Sony Electronics 3 while maintaining control of the spun-off entity...but also should be able to push down a meaningful but sustainable portion of its debt onto Sony Entertainment's newly-created entity," Loeb argued in his written proposal.

Third Point could not be contacted for a statement on the proposal.

The offer builds on the recent Japanese economic reform initiated by Prime Minister Abe. Loeb suggests that Sony's resurgence could become a major part of the success of this reform. "Under Prime Minister Abe's leadership, Japan can regain its position as one of the world's preeminent economic powerhouses and manufacturing engines. The most critical of Prime Minister Abe's "Three Arrows" approach will be unveiled next month: initiatives to create more economic growth in Japan through deregulation and structural reform. Leading businesses like Sony with leaders like you, Mr. Hirai, can spearhead this important growth," he said in his letter.

Loeb takes a tough-love approach to his evaluation of Sony, lightly knocking the company for its recent lack of focus. "Sony Electronics' many strong businesses, led by dedicated employees, are similarly obscured today by a lack of Focus. For example, Sony's Image Sensor business is large, rapidly growing, and profitable, but its contribution is masked by loss-making legacy semiconductor businesses," the hedge fund honcho wrote in his letter.

He also emphasizes Sony's under-appreciated value, and uses market competitors to demonstrate the company's value potential. "Peer multiples suggest there is over ¥525 of value per share not currently reflected in Sony shares...By simply focusing on this discrepancy in market perception, Sony can significantly increase shareholder value before realizing the benefits of additional structural change." Loeb expects the change to result in as much as a 60% upside in share prices.

Sony has said that it will consider the proposal and decide whether it is in the interest of the company, according to an article in The Wall Street Journal.

-- Written by David Webster in New York

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SNE $24.10 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs