The stakebuilding by one of the original “Tiger Cub” hedge funds is a vote of confidence in Masayoshi Son, SoftBank’s founder, as he works to boost the stock of his conglomerate.
SoftBank, which had a market capitalisation of ¥9.6tn ($86.3bn) at the close of trade on Wednesday, owns 27 per cent of Chinese ecommerce group Alibaba and 43 per cent of Yahoo Japan. It also controls telecoms companies SoftBank Mobile and Sprint, holds stakes in numerous other technology and telecoms companies, and has launched the $100bn Vision Fund to make tech investments around the world.
If the Vision Fund returns two and a half times its original investment over the next seven years, Tiger Global estimated that SoftBank could generate an additional $73bn of value before tax — more than 80 per cent of the company’s current market capitalisation.
Tiger Global also pointed to SoftBank’s plan for an initial public offering of its mobile phone business in Japan. That could be a key moment, say analysts, for the valuation of the company, which many investors have struggled to put a price on. Mr Son promised his own shareholders at SoftBank’s annual meeting last month: “I will make sure that the inside of our wallet becomes easier to calculate so that you can rest at night in peace.”
Tiger Global said it saw “many other opportunities” for SoftBank to boost value for its shareholders beyond the IPO of SoftBank Mobile, including the sale of Sprint to its US telecoms rival T-Mobile, share buybacks and a potential tax-deferred spin-off of the Alibaba stake.
It said: “In our view, the opportunity to buy the shares cheaply exists today because SoftBank’s stock has not appreciated in nearly five years, even though the value of its Alibaba stake has increased by over $90bn, more than SoftBank’s entire market capitalisation.”
Tiger Global was started by portfolio managers who previously worked at Julian Robertson’s Tiger Management, one of the first hedge funds. Its founder, Chase Coleman, and his team manage around $11bn in its hedge fund division and a similar amount in venture capital. The new SoftBank stake is being held in its hedge fund.
Masayoshi Son seeks to convince world of SoftBank’s true worth
Mr Coleman’s venture capital arm has invested in many of the same companies as SoftBank, including Flipkart, Uber, and Alibaba, and several companies in south-east Asia.
Its hedge fund business, meanwhile, has been one of the best performers in the industry this year. Its main fund was up 15.9 per cent in the first half of the year, while a long-only fund was up 16.7 per cent. HFR’s index of hedge funds across all strategies was up around 0.8 per cent to the end of June.