U.S. hedge fund Tiger Global Management has invested over $1 billion in Japan's SoftBank Group, Bloomberg reports.
SoftBank shares increased the most it has in three months within a few days at a high of 5.5%. But Tiger Global considers its new assets to be under-valued. The U.S. hedge fund firm, which runs around $22 billion in arrests, on Thursday, told investors that SoftBank is trading too low considering its net asset value. SoftBank share price has failed to appreciate in five years, including its Chinese online giant Alibaba which has recently added more than $90 billion in value, the asset manager said in a letter to investors, according to Bloomberg.
The Global Long Opportunities fund and the Tiger Global Investments hedge fund built the latest stake within the past few months, according to a Wednesday report by Financial Times.
However, SoftBank has spent money from its local operations recently to buy stakes in tech companies such as Yahoo Japan Corp., Alibaba and Sprint Corp. The Japanese conglomerate's technology-focused private equity effort, Vision Fund, which considers Apple Inc. and Saudi Arabia among its financial supporters, is targeting to raise $100 billion.
According to Tiger Global, SoftBank's total assets value is at $278 billion, and its net asset value at $190 billion, that's more than twice the current market capitalization. A data from Reuters, however, shows that SoftBank's market capitalization is under $87 billion. Tiger Global also said it's expecting the Japanese conglomerate to make a profit in the next three months through it's upcoming SoftBank Mobile initial public offering and among other moves.
SoftBank's discount to its asset value frustrates its executives
“The combination of a world-class set of assets trading at a record discount to NAV strikes us as an odd anomaly that is unlikely to exist forever,” Tiger Global said. “The stock is meaningfully undervalued.”
SoftBank shares were trading at the same price last year as at yesterday, whereas the Nikkei 225 stock has gained nearly 10%. Alibaba seems to have done a lot increasing about 30% within the same period, growing SoftBank's value in e-commerce to around $140 billion, a lot more than its $87 billion market value.
“In our view, the opportunity to buy the shares cheaply exists today because SoftBank’s stock has not appreciated in nearly five years, even though the value of its Alibaba stake has increased by over $90 billion,” Tiger Global said.
SoftBank's generosity in its asset value frustrates its executives, who frequently track the changes with plans of stepping up effects to close the annoying gap. While investors are demonstrating interests for more clarity, SoftBank plans to make that happen on how the Vision Fund will be beneficial and the valuing of its startup investments.
Tiger and SoftBank have a long history of investing alongside each other in companies due to their overlapping focus on technology. SoftBank last year acquired part of Tiger's stake in Flipkart Group, a leading Indian e-commerce firm.