Coleman's Tiger Global Is Taking $1 Billion SoftBank Stake

(Bloomberg) -- Chase Coleman’s Tiger Global Management has invested more than $1 billion in SoftBank Group Corp., according to a client letter seen by Bloomberg.

SoftBank’s shares rose 5.5 percent, the most in three months on an intraday basis, on Thursday after Tiger Global told investors that the Japanese conglomerate is trading at too steep a discount to its net asset value. Its share price fails to reflect the appreciation of assets, including Alibaba Group Holding Ltd., the asset manager said.

The Tiger Global Investments hedge fund and the Global Long Opportunities fund built the stake over the past few months. The Financial Times reported the investment earlier Wednesday. A representative for Tiger Global, which oversees about $22 billion, declined to comment.

One of the world’s biggest technology investors, SoftBank has used cash from its domestic operations to buy stakes in companies such as Sprint Corp., Yahoo Japan Corp., and Alibaba. The company’s Vision Fund, a technology-focused private equity effort that counts Saudi Arabia and Apple Inc. among its backers, has a goal of raising $100 billion.

Tiger Global puts SoftBank’s total asset value at $278 billion, and its net asset value at $190 billion -- more than double the current market capitalization, the letter shows. The money manager said it expects SoftBank to unlock value through the planned initial public offering of SoftBank Mobile over the next three months, and a potential tax-deferred spinoff of the Alibaba stake, among other moves.

‘World Class’ Assets

“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,” the firm said in the letter. “The stock is meaningfully undervalued.”

Tiger Global also said it values SoftBank’s position in the Vision Fund conservatively, at cost of $24 billion. If the Vision Fund posts returns of 250 percent over the next seven years, shareholders would see another $73 billion in added value, the letter said.

Tiger Global’s analysis accounts for net debt of $88 billion for SoftBank. The hedge fund excludes non-recourse debt -- like that of Sprint -- from that estimate, because the Japanese company does not owe anything to the creditors of its U.S. unit.

“We continue to believe the market significantly undervalues our stock and we welcome the support from a sophisticated institutional investor like Tiger Global,” said Takeaki Nukii, a SoftBank spokesman.

Alibaba Shares

SoftBank’s shares were trading at about the same level as a year ago yesterday, while the Nikkei 225 Stock average rallied almost 10 percent. Alibaba shares have surged about 30 percent in the same period, bringing the value of SoftBank’s stake in the e-commerce company to about $140 billion -- far more than its own market value of about $87 billion.

“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,” the letter said.

The company’s discount to its asset value frustrates its executives, who track the changes on a weekly basis and have been planning to step up efforts to close the gap, Bloomberg reported in February. They plan to make more transparent how the Vision Fund will benefit SoftBank and how its startup investments are valued. Investors have also been desperate for more clarity.

Because of their overlapping focus on technology, SoftBank and Tiger have a history of investing alongside each other in companies including car-hailing services Uber Technologies Inc., Ola, and Hangzhou Kuaidi Technology Co. Last year, SoftBank purchased a portion of Tiger’s stake in Indian e-commerce leader Flipkart Group.

Coleman founded New York-based Tiger Global in 2001. He is a so-called “tiger cub,” a term coined for alumni of Julian Robertson’s hedge fund Tiger Management, where Coleman was a technology analyst. The firm has a hedge fund business and an $11 billion venture capital unit.

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