Hedge fund manager Daniel Loeb expects Sony Corp to lay out a specific improvement plan and set financial targets for its entertainment business before the company’s annual general meeting next May, according to a source close to the hedge fund.
Loeb views Sony’s announcement on Tuesday as a “good outcome” even though the Japanese company rebuffed his hedge fund’s proposal to spin off its movies, television and music business, said the source, who spoke on condition of anonymity.
The source said Third Point LLC’s initial statement that it was “disappointed” with Sony’s decision may have created the wrong impression that the $13 billion hedge fund was unhappy with the outcome of the Sony board’s deliberations.
While Third Point would prefer a spin-off, it is satisfied with Sony’s promise to boost transparency and profits in its entertainment unit, said the source.
Loeb, one of the best known managers in the $2.25 trillion hedge fund industry, has waged a three-month campaign urging Sony to sell as much as one-fifth of its money-making entertainment arm to free up cash to revive the electronics business.
Sony Chief Executive Kazuo Hirai said on Tuesday that the entertainment unit is “integral to Sony’s strategy,” but he promised more financial disclosures, such as quarterly updates on revenue in the music and pictures segments.
The source close to Third Point said the announcement shows Sony has sharpened its focus on improving the entertainment unit and is addressing concerns the firm brought to management earlier this year.
Third Point is pleased with the progress in the electronic unit in recent months, the person said, adding that the hedge fund now wants to see Sony lay out a specific plan to boost the entertainment division’s profitability and transparency before the next annual general meeting, expected in May 2014.
The hedge fund is not currently considering taking a so-called proxy fight to Sony shareholders, though it remains a theoretical possibility, said the source.
Sony’s U.S. shares slid roughly 5 percent in afternoon trading to $20.67, though the stock price has climbed about 85 percent since the beginning of the year. Sony’s Tokyo-traded shares closed down 4.59 percent on Tuesday.
While it is unclear exactly when and at what price Loeb started buying stock in Sony in the first quarter, the investment is one of the hedge fund’s biggest winners this year, the person close to the firm said.
The hedge fund still thinks Sony’s current share price is both attractive and undervalued, the person said.
Loeb’s flagship Offshore fund rose 2.9 percent in July, boosting yearly returns to 15.9 percent, according to an investor who was not authorized to publicly discuss the private fund’s performance.
That gain trounces the average hedge fund, which is up about 3.6 percent for the year, according to Bank of America data.