Tiger Global builds $1bn SoftBank stake

US HEDGE fund Tiger Global has built a stake worth over $1 billion (R13.3bn) in SoftBank Group as it considers the Japanese firm undervalued, a source with direct knowledge of the matter said, driving SoftBank shares up as much as 6.8 percent.

The bump added nearly $6bn to SoftBank’s market capitalisation, narrowing the gap between the company’s limited valuation as a conglomerate and the valuation that the company says it deserves, thanks to its rich investments.

The Japanese tech and telecoms firm, which holds a nearly 30 percent stake in Chinese e-commerce giant Alibaba, has recently started taking action to address the issue, including preparing a listing of its domestic telecoms unit.

New York-based Tiger Global, which manages around $22bn in assets, told investors in a letter that SoftBank’s stock price had not increased over the past five years even though its holding in Alibaba had added more than $90bn in value.

SoftBank shares surged as much as 6.8 percent, pushing up the company’s market value to about $91bn. They closed up 6.4 percent at 9 376 yen (R1 113.69), their 10th consecutive day of gains.

The company’s charismatic chief executive Masayoshi Son, who owns 21 percent of SoftBank, said at a shareholders’ meeting last month that a “conglomerate discount” was weighing on the company’s stock.

He said the stock should be trading above 14 000 yen rather than where they were then – at around 8 000 yen – to account for its investments.

Besides Alibaba, SoftBank has a stake in US telecoms firm Sprint Corp and Yahoo Japan.

But SoftBank’s investments have left it with a heavy debt load. It had about $123bn of debt as of March end and has a debt-to-equity ratio of 3.97, compared with an industry median of 0.10.

Alibaba has a market capitalisation of $480bn.