Tiger Global builds $1 billion stake in SoftBank, calls it undervalued

SoftBank’s shares have appreciated by 54% in the last 5 years. Although its market capitalization is $87 billion, in comparison Alibaba has a market capitalization of $480 billion and the value of its shares have doubled since their listing on 2014.

As per a source with direct knowledge of the matter, U.S. hedge fund Tiger Global has built up a stake worth more than $1 billion in SoftBank Group Corp since it considers it to be undervalued.

With the news reaching the market, SoftBank’s shares rose by 6.8%.

In a letter to investors, Tiger stated despite the fact that its holding in Alibaba had added more than $90 billion in value, the prices of its shares had not increased over the last five years.

SoftBank has become deeply leveraged in its pursuit of winning investments. The conglomerate has stakes in Yahoo Japan and U.S. U.S. telecoms, including Sprint Corp.

Last month, at its Annual General Meeting (AGM), Masayoshi Son said, a “conglomerate discount” was weighing on the company’s shares and that its stock should be trading above 14,000 yen rather than at its current level of 8,000 yen.

“We continue to believe the market significantly undervalues our stock and we welcome the support from a sophisticated institutional investor like Tiger Global,” said SoftBank on Thursday.

Its shares rose by 6.4% on Thursday to 9,413 yen and was seen trading at 9,376 yen.

Incidentally, SoftBank’s shares, which have appreciated by 54% over the last 5 years, value the conglomerate at around $87 billion, roughly 10 times its forward earnings.

As of March 31, it carried a debt of $123 billion and had a debt-to-equity ratio of 3.97, compared to an industry median of 0.10.

Tiger Global’s investment in SoftBank is based on the latter’s decision to acquire U.S. investment group Fortress as well as the launch of its $100 billion Vision Fund.

Headed by Son, a self-described “unicorn-hunter”, its Vision Fund aims to invest in upcoming technologies ranging from connected devices, artificial intelligence, office-sharing to dog walking startups, such as Wag.

In May, Son disclosed that a second fund is on its way.

Tiger Global was not available for comment outside regular U.S. business hours.

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Categories: Creativity, Entrepreneurship, HR & Organization, Strategy

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