Newsletters - Asset Value Investors

AGT

Third Point Investors • Newsletter February 2022

Our position in Third Point Investors Limited (TPIL) was the largest contributor to performance as our public activist campaign came to an end with the appointment of an independent director we had proposed to the Board:
https://www.investegate.co.uk/third-point-investors-ltd–tpou-/prn/board-and-shareholder-update/20220218123552PDE52/. Despite a decline in TPIL’s NAV over February, its discount narrowed materially with a move in to 11% from the 18% at which it began the month.

AGT

Third Point Investors • Newsletter June 2021

As readers may be aware, we have been engaging with the Board of Third Point Investors (TPOU) in order to address the wide discount (five-year average: 20%) at which TPOU trades. Our open letter to the Board of TPOU as well as the requisition notice calling for an EGM can be found on AGT’s website.

AGT

Third Point Investors • Newsletter September 2019

In large part due to our engagement with the Board and Manager, Third Point Offshore Investors (TPOU) has been introducing various measures to address the discount over the past 18 months. The changes include a move to a Premium Listing, a buyback programme, the cancellation of TPOU shares held by the Master Fund, a reduction in management fee from 2% to 1.25%, and the appointment of a new well-regarded Chairman.

The latest initiative announced in September is a buyback programme to purchase up to USD200 million (almost a third of the pre-announcement market cap) of its own shares over three years. The Chairman has also made a public commitment to consult with shareholders on alternative measures after three years if insufficient progress on the discount has been made. The market took the news well, with the share price rising by +7% on the day of the announcement. Overall the share price was up +8%, adding 34bps to returns. The discount has tightened to 19% (from 26%) over the month.

AGT

Third Point Investors • Newsletter August 2019

Third Point Offshore Investors (TPOU) was our largest contributor, adding 23 basis points (bps) to returns with a 5% increase in its share price due to discount contraction in to 26%.

We are encouraged by moves taken by TPOU this year to address the wide discount to NAV at which its shares trade. These actions include a buyback programme which has seen c. 8% of outstanding shares bought back since Dec-18, and the appointment of a well-regarded Chairman. However, we believe that the persistently wide discount may prove difficult to resolve without further measures being taken to address it.

AGT

Third Point Investors • Newsletter July 2019

The presence of activist investor Third Point, whose London-listed vehicle is a top ten holding in our portfolio, on the register is encouraging. We agree with Third Point’s arguments that that there are several options available to management to unveil the attractiveness of Sony: (a) a spin-off of the Semiconductor business to allow investors to better understand the different entities; (b) disposal of the listed stakes in Sony Financial, M3, Spotify and Olympus (together, 16% of Sony’s market cap) which would have the benefit of both freeing up capital for growth, and deconsolidating Sony Financial; and (c) the deployment of a moderate amount of gearing. We believe that large-cap activism could have a trickle-down effect towards the smaller segments of the market as activist investors become increasingly aware of, and interested in, the opportunities available in Japan.

On an aside, we note the recent proposed Universal Music Group (UMG)/Tencent transaction values UMG at 22x 2019e EV/EBITDA; to our minds, this confirms the high value placed on unique content assets by strategic buyers and the read-across for Sony Music is, in our view, very positive.

AGT

Third Point Investors • Newsletter December 2018

Our engagement with portfolio companies has had further success, with the
announcement by Third Point Offshore Investors (TPOU) of a base fee cut
from 2% to 1.25% and the initiation of a buyback programme. We first
invested in TPOU in Jul-17. Since then, the company has moved to a
Premium listing; cancelled half of its shares held by the Master Fund; begun
repurchasing its shares; committed not to re-issue repurchased shares at a
discount to NAV; launched an active marketing programme; made changes
to its Board of directors; and – most recently – reduced its management fees
as outlined above. While we believe these measures mean the company is in
a better place now than it was before we appeared on the register (although
there is more scope for further improvements), NAV performance has been
disappointing and the managers need to turn this around if they are to justify
TPOU’s continued existence given the current discount remains comfortably
in excess of 20%.

AGT

Third Point Investors • Newsletter July 2018

Third Point Offshore (TPOU) (weak NAV, widening discount) also detracted
from returns. While we welcome the announced move to a Premium listing,
we regard the Board’s inaction on the discount (c20% at month-end,
calculated with shares held by the Master Fund treated as cancelled) as
unconscionable given that buybacks are now purportedly at their discretion.
We note that Third Point Reinsurance (TPRE), the US-listed vehicle whose
assets are also managed by Third Point has been and continues to be an
aggressive buyer of its own shares with the CEO of TPRE commenting on
their recent earnings call that “buying back shares below book is an
appropriate use of our capital” and re-iterating that shares will be bought back
“when we trade at or below 95% of diluted book value per share”. We own an
8% stake in TPOU, and continue to engage with the Board on issues
surrounding capital allocation.