Shareholder Revolt Preceding Sony's PS4 Launch
New stockholder forcing Kaz Hirai's hand on investment
Sony faces a major shareholder revolt in the lead-up to the PS4 launch if a recent letter from US hedge fund - Third Point LLC - manager Daniel Loeb to Sony CEO Kaz Hirai is anything to go on. Given that Loeb owns some $1-billion of Sony stock, that it one important letter - you can read the whole thing below in fact.
It begins with the sort of not-very-veiled threat that can be summed up as, "We have giant boots made of money, listen up, Hirai." It reads like this in fact:
"Dear Mr. Hirai... Thank you for agreeing to meet with us. (Third Point) is now the largest owner of Sony Corporation (“Sony” or the “Company”), with exposure to approximately 64 million shares valued at over ¥115 billion ($1.1 billion) through ¥71 billion ($700 million) of direct ownership and ¥44 billion ($440 million) of cash-settled swaps.
"We have made a Hart-Scott-Rodino filing with the United States Federal Trade Commission and have the right to increase our direct ownership. We hope the recommendations shared with you in this letter will be considered by your Board and adopted as a thoughtful approach to strengthening Sony."
You bet it will be considered.
The letter then outlines a number of ways in which Sony can be broken up (or de-siloed) in order for it to make more cash. The ideas begin with the only passing mention of gaming that the new stockholder is prepared to make:
"Sony has stood for innovative engineering and consumer satisfaction for decades. From televisions to gaming consoles to handsets, Sony epitomizes the proud legacy of Japanese manufacturing ingenuity, superior product design, and excellent user experience. However, many casual observers would be surprised to learn that while Sony is electronics, much of its current value is derived from a hidden gem – Sony’s Entertainment division."
Loeb then moves to the nub of the matter, the money matter:
"Like many conglomerates we have invested in previously, Sony has two strong businesses facing different challenges side by side, each obscuring the other’s true worth."
What to do? Basically, Loeb wants Sony to sell of a stake in Entertainment, "We believe existing Sony shareholders should be given priority to participate in the direct ownership of Sony Entertainment. Therefore, we recommend that rather than conducting a standard public offering, spin-off, or dividend, the Company offer subscription rights to current shareholders," he demands.
Sony, according to the FT, is not having it. The Pinkun reports the following releases via Bloomberg.
BFW 05/14 07:27 *SONY SAYS WILL CONTINUE DIALOGUE WITH INVESTORS
BN 05/14 07:27 *SONY SAYS ENTERTAINMENT UNITS IMPORTANT TO COMPANY GROWTH
BN 05/14 07:26 *SONY SAYS WILL CONTINUE DIALOGUE WITH INVESTORS
BN 05/14 07:26 *SONY COMMENTED IN E-MAILED STATEMENT
BFW 05/14 07:26 *SONY SAYS ENTERTAINMENT BUSINESSES ARE ‘NOT FOR SALE’
Basically, in the lead-up to the PS4, we have a huge battle of wills and cash on hand.
Full letter is available here as a PDF.
It begins with the sort of not-very-veiled threat that can be summed up as, "We have giant boots made of money, listen up, Hirai." It reads like this in fact:
"Dear Mr. Hirai... Thank you for agreeing to meet with us. (Third Point) is now the largest owner of Sony Corporation (“Sony” or the “Company”), with exposure to approximately 64 million shares valued at over ¥115 billion ($1.1 billion) through ¥71 billion ($700 million) of direct ownership and ¥44 billion ($440 million) of cash-settled swaps.
"We have made a Hart-Scott-Rodino filing with the United States Federal Trade Commission and have the right to increase our direct ownership. We hope the recommendations shared with you in this letter will be considered by your Board and adopted as a thoughtful approach to strengthening Sony."
You bet it will be considered.
The letter then outlines a number of ways in which Sony can be broken up (or de-siloed) in order for it to make more cash. The ideas begin with the only passing mention of gaming that the new stockholder is prepared to make:
"Sony has stood for innovative engineering and consumer satisfaction for decades. From televisions to gaming consoles to handsets, Sony epitomizes the proud legacy of Japanese manufacturing ingenuity, superior product design, and excellent user experience. However, many casual observers would be surprised to learn that while Sony is electronics, much of its current value is derived from a hidden gem – Sony’s Entertainment division."
Loeb then moves to the nub of the matter, the money matter:
"Like many conglomerates we have invested in previously, Sony has two strong businesses facing different challenges side by side, each obscuring the other’s true worth."
What to do? Basically, Loeb wants Sony to sell of a stake in Entertainment, "We believe existing Sony shareholders should be given priority to participate in the direct ownership of Sony Entertainment. Therefore, we recommend that rather than conducting a standard public offering, spin-off, or dividend, the Company offer subscription rights to current shareholders," he demands.
Sony, according to the FT, is not having it. The Pinkun reports the following releases via Bloomberg.
BFW 05/14 07:27 *SONY SAYS WILL CONTINUE DIALOGUE WITH INVESTORS
BN 05/14 07:27 *SONY SAYS ENTERTAINMENT UNITS IMPORTANT TO COMPANY GROWTH
BN 05/14 07:26 *SONY SAYS WILL CONTINUE DIALOGUE WITH INVESTORS
BN 05/14 07:26 *SONY COMMENTED IN E-MAILED STATEMENT
BFW 05/14 07:26 *SONY SAYS ENTERTAINMENT BUSINESSES ARE ‘NOT FOR SALE’
Basically, in the lead-up to the PS4, we have a huge battle of wills and cash on hand.
Full letter is available here as a PDF.
Read More Like This