Should Sony Listen to Investor Calls to Split the Company This Time?

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For the second time in six years, Dan Loeb and his activist hedge fund, Third Point, are calling on Sony Corp. to spin off assets in an effort to boost rewards for investors saddled with shares of a complicated media giant that is underappreciated on Wall Street.

It's not entirely deja vu, though. Last time, Third Point encouraged the Japanese conglomerate to jettison its "bloated" entertainment assets, but now it is bullish on that business and wants it to be the focus of a "New Sony."

Third Point sold its position within two years but has amassed $1.5 billion in shares since then, about 10 percent of Third Point's roughly $15 billion portfolio. Sony should also sell stakes in health care, insurance, Spotify and other assets, slim down its electronics business and allocate the "majority of capital investment and management focus" toward gaming, music and movies, in order to create "a leading creative entertainment company." Loeb and company have their supporters, especially since the stock jumped 6 percent in the first three trading days after June 13.

Still, some may argue that Loeb might have been better off simply staying put with the Sony stock he purchased for about $20 a share in August 2013; its value would have risen 160 percent. Nevertheless, Third Point argues that Sony remains "one of the cheapest large cap stocks globally."

 

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Should Sony Listen to Calls to Split the Company This Time?As the activist investor Daniel Loeb changes his tune on film and TV studios, he urges the Japanese conglomerate to spin off assets and focus on building a 'New Sony' with its 'undervalued' content business at the center.
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