Make way on Mount Rushmore for Steve Jobs, David Tepper, John Malone and Masayoshi Son. Dan Loeb, the US activist investor, included a Rushmore-esque mock-up of the four in a presentation he gave this week that revered what he calls their “value-compounding” services to investors. There is no mistaking why Mr Loeb has just announced a $1bn-odd position in SoftBank, the Japanese group founded by Mr Son.
Compared with Sony, Mr Loeb’s other recent high-profile bet on Japan, SoftBank is a far easier investment case. This year its shares have jumped 160 per cent, making it Tokyo’s best-performing blue-chip. Sony’s shares have almost doubled, but Mr Loeb’s interest there is based on the value he thinks can be created from making its film studio work better. When it comes to SoftBank, Mr Loeb is a classic long investor who admires Mr Son’s investments. There is much to like. Mr Son’s early bet on Alibaba has left his company with a stake worth at least $20bn.
But therein lies the difficulty of figuring out whether Mr Loeb has timed his investment well or not: SoftBank’s many moving parts. Take Alibaba, the world’s hottest IPO-in-waiting. A post-float capitalisation of $60bn (SoftBank owns just over a third) implies a value of only 24 times trailing earnings. Tencent, another China internet darling, is on a multiple of 43, which would put SoftBank’s Alibaba stake at $40bn. Then there is SoftBank’s deal habit. Earlier this year the company bought 78 per cent of Sprint, the US telecoms operator, for $22bn. Alibaba and Sprint alone can easily account for two-thirds of SoftBank’s market cap – before even thinking about its successful mobile business in Japan. Should any of those, or the company’s myriad other smaller deals, be underpriced, Mr Loeb is on to an easy winner.
Not everything Mr Son touches turns to gold: SoftBank’s pre-IPO investment in online games company Zynga, is down a third. But that will not bother his fans. SoftBank’s market capitalisation is just shy of $100bn – at which point it would be one of just seven Asian companies (excluding China’s state-directed behemoths) of such size. Sitting next to Toyota, BHP Billiton, Samsung, Commonwealth Bank of Australia, Rio Tinto and Tencent would be rather Rushmore-like, actually.
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