Investment firm Tiger Global has reportedly taken over a stake worth $1 billion in SoftBank Group and this deal has taken up the shares of the latter as much as 6.8 per cent.
Tiger Global stated to the investors in a letter that SoftBank’s stock price had not increased over the past five years even after its holding in Chinese e-commerce giant Alibaba had added more than $90 billion in value.
Tiger manages around $22 billion in assets and deploys capital globally in both public and private markets. The company provides its services to private funds that are pooled investment vehicles.
“We continue to believe the market significantly undervalues our stock and we welcome the support from a sophisticated institutional investor like Tiger Global,” SoftBank stated.
Masayoshi Son’s company had about $123 billion of debt as of end-March and has a debt-to-equity ratio of 3.97, compared with an industry median of 0.10. SoftBank’s shares increased to as high as 9,413 yen and were later trading at 9,376 yen.
On the other hand, the shares of Alibaba, which has a market capitalization of $480 billion, trade at 27 times forward earnings. They have highly risen since the Chinese e-commerce giant listed its shares in 2014.
Tiger Global’s SoftBank investment is based on the decision of the Japanese firm’s purchase of U.S. investment group Fortress and also the launch of its near-$100 billion Vision Fund to find and grow considerable technology leaders.
“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,” Tiger Global said in the letter. “The stock is meaningfully undervalued.”
SoftBank and Tiger Global together have a history of investing side by side each other in companies such as Uber, Ola, and Hangzhou Kuaidi Technology. SoftBank had purchased a portion of Tiger’s stake in Indian e-commerce giant Flipkart in the previous year.