Tiger Global builds $1bn SoftBank stake

Cape Times - - BUSINESS REPORT INTERNATIONAL - Sam Nussey and Sayan­tani Ghosh

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.

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