Billionaire Dan Loeb Goes to Japan; Can He Break Up Sony Corporation (ADR) (SNE)?

Other hedge funds haven’t been very interested in Sony Corporation (ADR) (NYSE:SNE) recently. We track over 400 hedge funds and other notable investors in our database of 13F filings as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year) and the largest holder of the stock at the beginning of this year was Arrowstreet Capital. Arrowstreet owned 1.2 million shares, which only came out to a position worth $14 million compared to its $25 billion in AUM (find Arrowstreet’s favorite stocks). The only other filer we track to own over $10 million worth of Sony stock was Renaissance Technologies, founded by billionaire Jim Simons (check out Renaissance’s stock picks).

As might be expected, management has at least opened by rejecting Loeb’s suggestion. The activist has won these battles before, but of course this one comes with the added complication of being in Japan and having to deal with the associated issues. We’re hesitant to take the government’s promises to open up business to a more freewheeling capitalist system, and in any case cultural factors could prove to be even larger hurdles. We do agree with Loeb that there is value potential here- assuming that he’s correctly evaluated the implied value of Sony Corporation (ADR) (NYSE:SNE) Entertainment- but it might not be wise to stake capital against decades of Japanese business history.

Disclosure: I own no shares of any stocks mentioned in this article.