The hedge fund billionaire may really have his eye on his prize asset — Yahoo
The news that activist shareholder Dan Loeb invited Sony to spin off its entertainment property had the entertainment industry buzzing this week: Who is Dan Loeb and what does he want with Hollywood?
The manager of the $12.9 billion hedge fund Third Point Ventures is smart, strategic and — according to an individual close to the hedge fund manager — he's not necessarily interested in entertainment per se.
He may, however, be interested in content.
"Hollywood is a small piece of business," said this individual, noting that Third Point owns about 5.3 percent of Yahoo and made its money this year trading Greek debt. "Dan hired Marissa Mayer to run Yahoo. If he was trying to transform Yahoo, having a traditional media company with a deep content library might be interesting to own.”
In other words, could Loeb be looking to marry Sony's content with Yahoo? Crazier things have happened.
Loeb is known not only as an activist shareholder in the mold of Carl Icahn, but as an extremely savvy one. Sony's entertainment assets may be undervalued at the moment, and Loeb may merely see that as an investment opportunity. (My sources say that Loeb's investment in Variety LLC is small, well under half of the company.)
He also clearly relishes the limelight.
The hedge fund manager has been making interesting moves of late, with a very public letter to Sony this week urging the Japanese giant to spin off its entertainment properties.
But Wall Street insiders pooh-poohed a report on Wednesday that Loeb was buying up shares in MGM on the private market at a $50/share price — a level that had shot up 78% over what it was just a month ago.
Said one veteran investor in the entertainment space: "I don't believe he paid $50; that's way too high. You wouldn't have to pay that to buy shares in the market. That would value the company at close to $4 billion. It wouldn't make any sense."
MGM shares were trading at $49.00 on the private market on Wednesday, up 10%, possibly on the news that Loeb was supposedly buying them.
Loeb built Third Point Ventures with lots of bluster behind him, his scathing rebukes of corporate leaders at companies like Agribrands and Star Gas bring him notoriety. Ben McGrath described him this way in the New Yorker: “Loeb's favored device is the scolding letter, formally addressed, publicly released, and ruthlessly frank in its assessments of managerial competence. He writes the boards and CEOs of companies that his fund has invested in, complaining, in effect, that they are not making him and his clients enough money.”
Loeb spent years quietly amassing wealth as a value investor, placing bets on less than scintillating companies people tended to overlook. That is, until Yahoo.
Loeb built a six percent stake in the company and waged a campaign to focus the company on media and advertising. He used his firm's stake and his own dynamism to unseat CEO Scott Thompson in a scandal known as “Resumegate” and land on the board along with two others of his choosing.
Whatever he wants with Hollywood – big or small – it's likely to get interesting.
Brent Lang and Lucas Shaw contributed to this report.