Daniel S. Loeb, a major Wall Street hedge fund manager for Third Point, thinks Sony should sell off part of its Entertainment arm. When people think of Sony, televisions and video games are generally the first thing that comes to mind, but the company is also a major player in the movie and music business.
In a letter sent to Sony CEO Kazuo Hirai, Loeb says he thinks that a 15-20 percent sale would not only make it leaner, but that the partial spinoff would give its shares a 60-percent boost in value. Of course, this would be no easy matter for the company to accomplish, as its record label has deals in place with some very popular artists like Ke$ha and Carrie Underwood, and losing that income would be painful.
Third Point is one of the largest stakeholders in Sony, owning 6.5-percent of its shares, so his recommendations are obviously aimed at what he thinks will benefit the holdings his company's manages the most. Under his proposed strategy current shareholders of the company would be given the first chance to buy shares of the spun off division.
The company's entertainment arm accounts for somewhere in the area of 40 percent of Sony's enterprise value, but Loeb says that its profit margins fall short when compared to other US-listed competitors.
As one might expect, Sony is not a fan of Loeb's plan, and as Reuters reports, it has said that its entertainment division is important for the continued growth of the company, and it is definitely not for sale at this time. Both sides certainly have some good points, but in the end, Loeb's motivations seem to be strictly based on share price and value of its hedge fund, while Sony has the long term goals of the company to think about.