I've found that Playstation fans aren't very trusting of Dan Loeb and Third Point. When news came out that he approached the company with a proposal to break up 15 % of their entertainment business, they came out of the woodwork to dismiss it and tout Sony's good standing.
Only those fans are way off. Loeb is Sony's biggest outside single investor, and he is a power player in the world of hedge fund managers and investor activists. Loeb is uniquely positioned to help Sony break out of their doldrums, and he is also in a place where he can do the company a lot of damage.
To help you understand Loeb's position, I'll veer off video game for a bit and talk about Yahoo, which recent events have made the two the talk of the tech world. Last year, Loeb effectively tore up then-Yahoo CEO Scott Thompson, and got him kicked out to effectively take over the company. In a little over a year, he has helped turn the tide of unprofitability in the company, installed key acquisition Marissa Mayer as new CEO, and just recently, cashed out of the company, earning more than what he initially put in. Plus, Yahoo paid for all of his shares to boot.
Why did Yahoo let themselves be steamrolled like this? The company was suffering from prolonged bad leadership, making the company unprofitable in its key business for too long. To be fair to Loeb, he actually has helped turn the company around, and has left it in a state where it actually has a chance on its own.
Coming off of this master stroke, Loeb now intends to put the pressure on Sony. In a recent letter to investors, he plays up the success of Sony's gaming division, but criticizes Hirai's inaction on entertainment. He compares their most recent releases to famous film bombs Ishtar and Waterworld, and claims that unlike their gaming division, entertainment is run without accountability and poor control over finances.
Loeb's actions have recently given cause for Sony shares to rally, because investors think, like Yahoo, Loeb can turn things around for Sony. In the financial world, Sony is famous for having had a lost decade, losing previously dominated ground to competitors in the TV and mobile markets. Even if only to serve his own purposes, many believe Loeb has it in him to instigate such a turnaround.
On the flip side, you do not want to piss off one of these activist investors, especially one who has discreetly collected sway in your performance in the stock markets. Loeb has started nudging Sony about this proposal gently, knowing Japan has a culture repellent against corporate takeovers, but in a position of power he may set himself for takeover sooner than a console launch.
It goes without saying, the final outcome of these events is integral to Sony's future, and subsequently will send shockwaves across the gaming industry. Like him or not, you have to pay attention to Dan Loeb for the next few months.
I've shared a video from Reuters on what former Sony employees think of Loeb's proposal below.
Source: Valuewalk
