- Billionaire activist investor Paul Singer bought a $2.5 billion stake in SoftBank.
- Singer is pushing for governance change and a share buyback program.
- Some experts believe there is common interest between the two sides.
Billionaire activist investor Paul Singer and his Elliott Management hedge fund look to be preparing for battle against fellow billionaire Masayoshi Son and his holding company SoftBank.
Elliott Management built up a $2.5 billion stake in Japan-based SoftBank and the activist hedge fund is looking to use its influence and push for changes. Elliott Management and its leader Singer are considered to be among the best — if not the best activist investors on the Street.
Elliott wants SoftBank to improve its corporate governance, especially related to transparency on its investment decisions, especially within SoftBank’s highly publicized $100 billion “Vision Fund.” Elliott also wants SoftBank to buyback as much as $20 billion worth of its own stock to help lift its market value, according to The Wall Street Journal.
Some of Elliott’s high-ranking executives already met with Son and his top-lieutenants, including CFO Yoshimitsu Goto and Vision Fund boss Rajeev Misra, sources told WSJ.
A SoftBank spokeswoman told WSJ it is in “complete agreement” that its shares are “deeply undervalued by public investors.”
Elliott’s stake immediately follows a series of failures at SoftBank, most notably a multi-billion dollar loss in WeWork which prompted the Japanese company to report its worst quarterly loss ever.
Fight Of The Century?
SoftBank’s $100 billion Vision Fund, while notable, is just a “small part” in SoftBank’s overall portfolio, Tusk Ventures founder Bradley Tusk explained to CNBC Friday morning. In fact, SoftBank’s stake in Alibaba, Sprint, and other Japanese telecom properties alone are worth more than $200 billion.
Nevertheless, SoftBank could benefit from some “governance discipline” as only two of its 11 directors are independent and they could benefit from some fresh blood with expertise in technology investments.
But at the same time, Son’s entire empire is built on the premise of holding investments for centuries. As such, a demand to buyback stock to temporarily close what may be a legitimate valuation discount is at odds with Son’s vision.
USA Versus Japan
Waging a potential drawn out and lengthy activist campaign from the U.S. against a Japanese company poses multiple challenges, Kenneth Squire, founder and principal of 13-D monitor, also said on CNBC. For instance, Japanese investors aren’t likely to play nice with American activist investors while Japanese laws pertaining to activist campaigns aren’t as defined.
But at the end of the day it “won’t take a lot” to appease Elliott and there is a common interest between both sides. In fact, Son would stand to benefit among the most since he owns more than 20% of the entire company.