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Sony Should Sell Its Spotify Stake and Focus on Entertainment, Activist Investor Says

Japanese conglomerate should emphasize its gaming, music and film businesses, investor Dan Loeb argues

Sony must spin off its semiconductor business, sell its stake in Spotify, and double down on becoming a “creative entertainment company,” activist investor Dan Loeb argued.

In a new note and presentation shared with investors on Thursday, Loeb’s Third Point Management said that the electronics and entertainment giant’s “complex structure and business holdings” has led to a stock price discount. “Investors are reluctant to own Sony shares because of the difficulty in forecasting so many business,” the firm argued in a 102-page presentation titled “A Stronger Sony.”

Third Point recommended four remedies to help Sony “unlock its full value”:

  1. Spinning off its semiconductor division as “Sony Technologies” and listing it in Japan; the division accounts for more than 70% of smartphone image sensors and could be worth $35 billion in five years, according to the New York-based firm.
  2. Refocus “New Sony” as a “leading global entertainment company.”
  3. Consider selling off its equity stakes in companies like Spotify, Olympus, M3 Inc. and Sony Financial.
  4. Reinvest the money earned from divesting its equity stakes back into the business.

The firm, which disclosed a $1.5 billion investment in Sony, said the moves would better allow the company to “reduce complexity” and emphasize its gaming, music and film businesses.

A rep for Sony did not immediately respond to TheWrap’s request for comment. A company spokesperson, in a statement to Bloomberg, declined to comment but said the company takes proposals like this “seriously.”

Sony, led by CEO Kenichiro Yoshida, reported in April its Pictures division made a profit of $489 million in 2018, marking a 30% increase from the year before, despite its overall sales dropping 3% to about $8.8 billion. Sony has several highly anticipated movies coming out this year, including “Men In Black: International,” Quentin Tarantino’s “Once Upon A Time In Hollywood,” a “Jumanji” sequel, and the latest Spider-Man installment. The company is also the maker of PlayStation and its music division is home to artists like Beyonce, Bruce Springsteen and Mariah Carey, and recently had a hit with Lil Nas X’s “Old Town Road.”

Sony shares — which have dropped from a 52-week high of about $61.60 per share in September — increased 3.3% on Friday morning to $51.32 per share.