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US fund invests $1bn in SoftBank, calling it 'undervalued'

Tiger Global says Masayoshi Son is 'Japan's most successful investor'

Tiger Global said SoftBank CEO Masayoshi Son's track record, including his highly successful stake in Alibaba, proves that he is worthy of the investment.   © Reuters

NEW YORK -- U.S. investment fund Tiger Global revealed on Wednesday that it had acquired a stake of more than $1 billion in SoftBank Group, telling investors that the Japanese telecom and technology company's stock is underpriced relative to its assets.

In a letter to investors, which was seen by Nikkei, Tiger Global said: "We believe the stock is meaningfully undervalued." The SoftBank investment was made through two of its hedge funds during the April-June quarter. 

The fund views SoftBank's $89 billion market capitalization as a bargain because the stock is only trading at 10 times estimated net profit for 2019. The stock "can be purchased at a large discount to the underlying value of its assets, which we believe should continue to appreciate," it said.

Founded by billionaire hedge fund manager Charles Coleman,Tiger Global is one the industry's largest funds with $22 billion in assets under management, split between hedge funds and venture capital. It became familiar with SoftBank through mutual portfolio companies like Indian e-commerce firm Flipkart and U.S. ride-hailing provider Uber Technologies.

Another factor behind the fund's decision was SoftBank CEO Masayoshi Son. "We and others consider [him] Japan's most successful investor," it said. Over 90% of Son's net worth is tied up in his 21% stake in SoftBank, making him closely aligned with outside shareholders.

"An investment track record speaks for itself," the letter said, pointing to some of Son's biggest wins. "A $70 million investment in Yahoo Japan that turned into a stake worth $8 billion; a $100 million investment in Alibaba Group Holding, now worth $130 billion; a $3.7 billion investment in Nvidia a year ago that is currently worth $7 billion," the letter cited as examples. 

The two Tiger Global hedge funds with positions in SoftBank mainly invest in information technology and internet companies. The main hedge fund grew 15.9% for the first half of this year, while its long-only fund rose 16.7%. 

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