Sony must spin off its semiconductor business, sell its stake in Spotify, and double down on becoming a “creative entertainment company,” activist investor Dan Loeb argued.
In a new note and presentation shared with investors on Thursday, Loeb’s Third Point Management said that the electronics and entertainment giant’s “complex structure and business holdings” has led to a stock price discount. “Investors are reluctant to own Sony shares because of the difficulty in forecasting so many business,” the firm argued in a 102-page presentation titled “A Stronger Sony.”
Third Point recommended four remedies to help Sony “unlock its full value”:
- Spinning off its semiconductor division as “Sony Technologies” and listing it in Japan; the division accounts for more than 70% of smartphone image sensors and could be worth $35 billion in five years, according to the New York-based firm.
- Refocus “New Sony” as a “leading global entertainment company.”
- Consider selling off its equity stakes in companies like Spotify, Olympus, M3 Inc. and Sony Financial.
- Reinvest the money earned from divesting its equity stakes back into the business.
The firm, which disclosed a $1.5 billion investment in Sony, said the moves would better allow the company to “reduce complexity” and emphasize its gaming, music and film businesses.
A rep for Sony did not immediately respond to TheWrap’s request for comment. A company spokesperson, in a statement to Bloomberg, declined to comment but said the company takes proposals like this “seriously.”
Sony, led by CEO Kenichiro Yoshida, reported in April its Pictures division made a profit of $489 million in 2018, marking a 30% increase from the year before, despite its overall sales dropping 3% to about $8.8 billion. Sony has several highly anticipated movies coming out this year, including “Men In Black: International,” Quentin Tarantino’s “Once Upon A Time In Hollywood,” a “Jumanji” sequel, and the latest Spider-Man installment. The company is also the maker of PlayStation and its music division is home to artists like Beyonce, Bruce Springsteen and Mariah Carey, and recently had a hit with Lil Nas X’s “Old Town Road.”
Sony shares — which have dropped from a 52-week high of about $61.60 per share in September — increased 3.3% on Friday morning to $51.32 per share.