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[Mibu no ookami]

Sony is looking to sell up to 80% of its Financial Group it made a wholly-owned subsidiary in 2020.

Sony Weighs Financial Arm IPO to Fuel Big Investment Push

“Sony’s image sensor and entertainment businesses will need much bigger investment in the future. Meanwhile, you need a strong base for financial services,” Chief Operating Officer Hiroki Totoki said at the briefing. “That’s why we decided to consider using a virtual spinoff — which allows us to keep Sony’s name on the financial service arm while it gains the ability to raise cash independently.”

I suggested in the past that Sony might sell off its Finance Group just two weeks ago and that they might utilize the funds from the sell off to help it invest further in its core business elements.

"Sony Group has a market cap of 115 billion dollars. That's quite small compared to some of their competitors. Their competitors are Microsoft (2.27T), Apple (2.67T), Google (1.34T), Amazon (1.06T), Nvidia (696B), Tencent (410B), and even Netflix (141B). And Sony is largely split between Video Games, Movies, Music, Electronics, and even Finances (I can see them selling off their financial subsidiary to fund expansion elsewhere). And that isn't to say that any of their much larger competitors are all in on video games (they aren't)" - Mibu no Ookami, May 3rd, 2023

Their stock has increased from 115 to 119 billion with a significant gain from today's news that they'll be selling their financial group and investing that money elsewhere. I expect they'll get a decent bump after the showcase next week as well.

Here is where the speculation fits in as to where they'll spend that money. I still think T2 is by far the best buy that Sony could get. It checks so many boxes and I think they have fairly good reason to think they could get it past regulators now that the EU ruled in favor or the Activision buy and the CMA dismissed the console concerns.

Ultimately, a deal for T2 is going to cost upwards of 30 billion dollars, which I think will be a mixture of cash, financing, and stock consideration. Aside from T2 though, it's clear that they're interested in FromSoftware/Kadokawa.

I think Jim Ryan and Sony Group senior leadership has recognized some key points here

• The absolute bullet that they MAY have sidestepped with Microsoft attempting (and likely failing) to buy Activision Blizzard King
• That they're extremely vulnerable to the large money in the industry
• That if this deal is blocked that T2 could be a likely alternative for Microsoft.
  • I think T2 and EA are the obvious next choices for Microsoft and that of the two the one that would hurt Sony more would be T2 and that T2 is cheaper to buy than EA.
• Sony also recognizes that Microsoft is embattled at the moment with the ABK deal so can't jump into T2 right now, so the timing is really key here.

 

[Baki]

Sony is looking to sell up to 80% of its Financial Group it made a wholly-owned subsidiary in 2020.

Sony Weighs Financial Arm IPO to Fuel Big Investment Push

“Sony’s image sensor and entertainment businesses will need much bigger investment in the future. Meanwhile, you need a strong base for financial services,” Chief Operating Officer Hiroki Totoki said at the briefing. “That’s why we decided to consider using a virtual spinoff — which allows us to keep Sony’s name on the financial service arm while it gains the ability to raise cash independently.”

I suggested in the past that Sony might sell off its Finance Group just two weeks ago and that they might utilize the funds from the sell off to help it invest further in its core business elements.

"Sony Group has a market cap of 115 billion dollars. That's quite small compared to some of their competitors. Their competitors are Microsoft (2.27T), Apple (2.67T), Google (1.34T), Amazon (1.06T), Nvidia (696B), Tencent (410B), and even Netflix (141B). And Sony is largely split between Video Games, Movies, Music, Electronics, and even Finances (I can see them selling off their financial subsidiary to fund expansion elsewhere). And that isn't to say that any of their much larger competitors are all in on video games (they aren't)" - Mibu no Ookami, May 3rd, 2023

Their stock has increased from 115 to 119 billion with a significant gain from today's news that they'll be selling their financial group and investing that money elsewhere. I expect they'll get a decent bump after the showcase next week as well.

Here is where the speculation fits in as to where they'll spend that money. I still think T2 is by far the best buy that Sony could get. It checks so many boxes and I think they have fairly good reason to think they could get it past regulators now that the EU ruled in favor or the Activision buy and the CMA dismissed the console concerns.

Ultimately, a deal for T2 is going to cost upwards of 30 billion dollars, which I think will be a mixture of cash, financing, and stock consideration. Aside from T2 though, it's clear that they're interested in FromSoftware/Kadokawa.

I think Jim Ryan and Sony Group senior leadership has recognized some key points here

• The absolute bullet that they MAY have sidestepped with Microsoft attempting (and likely failing) to buy Activision Blizzard King
• That they're extremely vulnerable to the large money in the industry
• That if this deal is blocked that T2 could be a likely alternative for Microsoft.
  • I think T2 and EA are the obvious next choices for Microsoft and that of the two the one that would hurt Sony more would be T2 and that T2 is cheaper to buy than EA.
• Sony also recognizes that Microsoft is embattled at the moment with the ABK deal so can't jump into T2 right now, so the timing is really key here.

It's clear that they want to have the option of levering up. Stock/cash M&A is not an issue. However, debt deals could be limited due to debt:equity ratio requirements as a financial institution. Just a note, this would be a special stock dividend for shareholders, Sony would not directly profit from spinning off the finance arm.

 

[feynoob]

Take 2 is impossible for Sony.

Other than that, this news is quite shocking.

 

[Mr.Phoenix]

Take 2 is impossible for Sony.

Other than that, this news is quite shocking.

Why? And Why?

 

[Yoboman]

Take 2 is impossible for Sony.

Other than that, this news is quite shocking

Not really? They were in the bidding to buy Fox a few years back for around 50 billion before Disney won the bidding

Maybe impossible from regulatory POV if that's what you're getting at

 

[feynoob]

Why? And Why?

Not really? They were in the bidding to buy Fox a few years back for around 50 billion before Disney won the bidding

Maybe impossible from regulatory POV if that's what you're getting at

Fox made sense at that time, due to their business.
But this is take 2 which is quite limited to gaming. And they can't make their games exclusive as they will lose a lot of money in the process. And as you said, regulators won't approve this merge.

They have more benefits from square enix as that is cheaper option and can print alot of money and has immense connection with PS.

 

[Mibu no ookami]

It's clear that they want to have the option of levering up. Stock/cash M&A is not an issue. However, debt deals could be limited due to debt:equity ratio requirements as a financial institution. Just a note, this would be a special stock dividend for shareholders, Sony would not directly profit from spinning off the finance arm.

That's just not true, The COO specifically said this is to raise cash to invest in core business. Maybe we're on different pages here, but this isn't about enriching shareholders.

 

[Alebrije]

Wow, I knew Sony has less money than other big companies but it pales compared to them..

 

[Wastelander92]

Still think Kadowaka makes the most sense for Sony corp.

 

[Mibu no ookami]

Fox made sense at that time, due to their business.
But this is take 2 which is quite limited to gaming. And they can't make their games exclusive as they will lose a lot of money in the process. And as you said, regulators won't approve this merge.

They have more benefits from square enix as that is cheaper option and can print alot of money and has immense connection with PS.

Fox made sense but T2 doesn't? What does Fox do outside of TV and movies for Sony Pictures? T2 is no more limited, not to mention the transmedia potential of GTA, Red Dead, and Mafia. Gaming, not movies is Sony's chief business, if they were willing to go upwards of 50 billion on Fox, they can and will certainly go as far as 30 billion on T2.

Regulators aren't going to block a 30 billion dollar acquisition after greenlighting Microsoft on consoles (CMA) and collectively (EU). Maybe the FTC would try to block but I doubt it and they likely wouldn't be successful in court (just like they wouldn't with Microsoft).

 

[8BiTw0LF]

They have more benefits from square enix as that is cheaper option and can print alot of money and has immense connection with PS.

No reason to buy Squenix when they can just make exclusivity deals. Sony has Squenix in their back pocket.

 

[BennyBlanco]

Why? And Why?

Because regulators

 

[bitbydeath]

Fox made sense at that time, due to their business.
But this is take 2 which is quite limited to gaming. And they can't make their games exclusive as they will lose a lot of money in the process. And as you said, regulators won't approve this merge.

They have more benefits from square enix as that is cheaper option and can print alot of money and has immense connection with PS.

I agree, but they wouldn’t need to sell the financial sector in order to obtain SE.

I hate these acquisition wars.

 

[SlimeGooGoo]

.

 

[feynoob]

Fox made sense but T2 doesn't? What does Fox do outside of TV and movies for Sony Pictures? T2 is no more limited, not to mention the transmedia potential of GTA, Red Dead, and Mafia. Gaming, not movies is Sony's chief business, if they were willing to go upwards of 50 billion on Fox, they can and will certainly go as far as 30 billion on T2.

Regulators aren't going to block a 30 billion dollar acquisition after greenlighting Microsoft on consoles (CMA) and collectively (EU). Maybe the FTC would try to block but I doubt it and they likely wouldn't be successful in court (just like they wouldn't with Microsoft).

Fox does bolster their media presence, considering the amount of content they have.

As for take 2, FTC clearly outlined the big 4 as no, which are EA, take 2, Activision and Ubisoft.

 

[feynoob]

I agree, but they wouldn’t need to sell the financial sector in order to obtain SE.

I hate these acquisition wars.

Same here.

If that Activision deal somehow gets approved, there would be irreversible harm to the gaming sector as every one is up for sale.

 

[ElCasual]

The best choice is Capcom.

 

[Raonak]

Sony doubling down on playstation is always a good thing.

 

[Baki]

That's just not true, The COO specifically said this is to raise cash to invest in core business. Maybe we're on different pages here, but this isn't about enriching shareholders.

I read the PR release and they said that a potential plan is a spin-out with a special stock dividend to Sony stock holders. As an independent company, Sony Life can raise money independently.

A method in which the parent company, Sony, continues to hold a portion of its shares of SFGI while distributing the remaining shares to its shareholders through dividends in kind (non-cash dividends). From the perspective of securing trading opportunities for Sony’s shareholders who receive the distribution of such shares, and satisfying qualifications for tax-free treatment in Japan, Sony intends that the shares of SFGI would be listed on, at least, a domestic stock exchange in Japan immediately after the distribution of the shares.

https://www.sony.com/en/SonyInfo/IR/library/presen/strategy/pdf/2023/press_E.pdf

Take 2 is impossible for Sony.

Other than that, this news is quite shocking.

T2 would be $27B based on a reasonable 30-40% premium. Sony can afford it. The question comes down to regulators.

 

[Flutta]

 

[ToTTenTranz]

Sony doesn't need to buy anything because the Activision-Blizzard deal is dead in the water.

Let the 3rd parties stay 3rd parties so that more people can access their games, and let Sony keep managing their 1st parties as well as they have for the past decade while enlarging their developer pool in a sustainable way.

They don't really need to react to anything from Microsoft. Those guys keep burying themselves in the sand, and will continue to do so under their current management.

 

[ChorizoPicozo]

it seems like a big deal. but I am too ignorant to really have an informed thought.

 

[HawarMiran]

I am a layman, so I have no clue what the fuck I am talking about. But I would rather have them invest in their own studios and new franchises. Like imagine a GTA competitor a la Sleeping Dogs . I guess they would have more reasons to get TakeTwo besides GTA, but still I find this approach of buying big established publishers for so much money a bit wild....

 

[Mibu no ookami]

Fox does bolster their media presence, considering the amount of content they have.

As for take 2, FTC clearly outlined the big 4 as no, which are EA, take 2, Activision and Ubisoft.

I don't recall FTC saying that these 4 were unbuyable by anyone. In fact Ubisoft is worth only 3 billion euro... they're not even close to being in the same conversation as EA, T2, and Activision. Moreover, there are bigger 3rd party publishers than Ubisoft outside of those 3.

 

[bitbydeath]

it seems like a big deal. but I am too ignorant to really have an informed thought.

 

[Unknown Soldier]

Sony's market cap is limited by the fact they are a Japanese company. The Japanese stock market only recently returned to it's 1990 ATH. It's literally been 33 years of going nowhere for the JP stonks, and Sony is hamstrung by this.

I've seen speculation that if Sony were an American company, their market cap would be be around $300-400 million instead of $120 million. This is still a fraction of the market cap of the tech megacaps, especially $2 trillion Microsoft, but it's more reasonable than what it appears to be now.

 

[Topher]

 

[Mr.Phoenix]

I don't even know why we have somehow just concluded that `elsewhere` means Playstation. Especially considering that PS dept is at such a good pace that they do not need to see off other parts of Sony to sustain it/grow it.

 

[Mibu no ookami]

I read the PR release and they said that a potential plan is a spin-out with a special stock dividend to Sony stock holders. As an independent company, Sony Life can raise money independently.

https://www.sony.com/en/SonyInfo/IR/library/presen/strategy/pdf/2023/press_E.pdf

This is a non-cash dividend. They're still going to use the money to invest in their core businesses.

 

[IntentionalPun]

Honestly don't think Playstation needs to buy any big dev or publisher.

They have a large studio group that is already a lot to manage and they aren't really at risk of losing market share or anything and don't have that much more to gain unless they want to push back into having a mobile device.

Also Sony having a much bigger piece of the market means getting things past regulators is a different calculus for them.

 

[Mibu no ookami]

I don't even know why we have somehow just concluded that `elsewhere` means Playstation. Especially considering that PS dept is at such a good pace that they do not need to see off other parts of Sony to sustain it/grow it.

I think it's less of a conclusion and more speculation. They could certainly put that money into expanding other Sony subsidiaries, they especially call out Imaging, that being said I think we just saw SIE significantly threatened by big money, so I think the timing of this (which I literally called out two weeks ago) can't be ignored.

 

[Yoboman]

Fox made sense at that time, due to their business.
But this is take 2 which is quite limited to gaming. And they can't make their games exclusive as they will lose a lot of money in the process. And as you said, regulators won't approve this merge.

They have more benefits from square enix as that is cheaper option and can print alot of money and has immense connection with PS.

I agree but from a corporate strategy POV I don't think exclusivity would be THAT important to them. They seem more interested in ownership of great content producers and IP. Also leveraging that across other mediums. Take2 have a lot of IP that would fit well there

Having GTA leverage vs COD would ensure us a nice cold war stalemate. Neither could go exclusive without the other doing the same

I agree there are more cost effective buys for them

 

[Mibu no ookami]

Honestly don't think Playstation needs to buy any big dev or publisher.

They have a large studio group that is already a lot to manage and they aren't really at risk of losing market share or anything and don't have that much more to gain unless they want to push back into having a mobile device.

Also Sony having a much bigger piece of the market means getting things past regulators is a different calculus for them.

I think there are many who still see Sony as a console company. That just isn't the case. Under Jim Ryan they're looking to turn PlayStation into a platform rather than a box.

This means Console, PC, Mobile, Cloud, VR, Movies & TV.

They don't have sufficient market share in PC or Mobile or even in Cloud.

T2 helps them in each one of these segments without significantly diverting from what they can do with their primary studios. Buying T2 is a transformative move one that many companies make when they're trying to reach a new level.

Look at Disney who bought LucasFilm, Marvel, and Fox...

In 2008 Disney's stock price was 22 dollars. Today it is nearly 100 dollars per share. That is nearly a 5x increase in market cap due to aggressive expansion.

Disney bought Star Wars for 4 billion, Marvel for 4 billion, and fox for 71 billion dollars.

They likely couldn't have afforded Fox had they not bought Marvel and Star Wars.

I get it that people don't love the consolidation here, but it's not a matter of whether you like it or not. It's happening. For Sony, they have to ask themselves what part they want to play in it and when.

 

[feynoob]

I don't recall FTC saying that these 4 were unbuyable by anyone. In fact Ubisoft is worth only 3 billion euro... they're not even close to being in the same conversation as EA, T2, and Activision. Moreover, there are bigger 3rd party publishers than Ubisoft outside of those 3.

Ubisoft has a lot of studios and content.
If they have the funding, they can print out a lot of AAA games. But because of the that, they aren't viewed the same as the three that you mentioned.

List of Ubisoft subsidiaries

Ubisoft is a French video game publisher headquartered in Montreuil, founded in March 1986 by the Guillemot brothers. Since its establishment, Ubisoft has become one of the largest video game publishers, and it has the largest in-house development team, with more than 14,000 employees working in...

ultimatepopculture.fandom.com

 

[Mibu no ookami]

I agree but from a corporate strategy POV I don't think exclusivity would be THAT important to them. They seem more interested in ownership of great content producers and IP. Also leveraging that across other mediums. Take2 have a lot of IP that would fit well there

Having GTA leverage vs COD would ensure us a nice cold war stalemate. Neither could go exclusive without the other doing the same

I agree there are more cost effective buys for them

Here is a quick summary of what they'd be able to do with buying T2

They'd be able to put GTA6 and Red Dead 3 on their exclusive PC Storefront along with their other franchises. They could then bring 3rd parties to their PC Storefront/VR Storefront and generate royalties from games sold in that storefront. They could leverage royalty pricing on PS5 to attract publishers to their PC storefront. They could leverage console exclusivity deals into console+PC exclusivity deals.

Sony already publishes MLB The Show (multiplatform) they could add in PGA Tour 2K (have Clap Hanz develop it), WWE 2K, NBA 2K. They could add MLB The Show to 2K Sports. They could expand 2K sports and make a deal with FIFA and make FIFA 2K. Sony could make marketing deals with the NBA, MLB, and FIFA to market PlayStation as a platform. Soccer gaming is huge business for Sony, especially in Europe, their strongest region.

PlayStation Pictures and Sony Pictures could make TV/Movies for GTA and Red Dead Redemption. Throw in other properties like Mafia as well.

With Zynga they could create their own mobile store and challenge Apple and Google along with Epic.

 

[Mibu no ookami]

I am a layman, so I have no clue what the fuck I am talking about. But I would rather have them invest in their own studios and new franchises. Like imagine a GTA competitor a la Sleeping Dogs . I guess they would have more reasons to get TakeTwo besides GTA, but still I find this approach of buying big established publishers for so much money a bit wild....

T2 just announced that GTA5 sold 180 million copies and RDR2 sold 53 million copies... Two of the best-selling game franchises of all time and nothing that Sony has made has ever come close to either of those games in sales.

 

[ZehDon]

NeoGAF: "Consolidation is BAD! Microsoft shouldn't be ALLOWED to buy ABK! They'd make COD exclusive and RUIN gaming!"
Also NeoGAF: "Sony needs to buy Take 2! GTA6 as PS exclusive is the smartest move! Can't stop the PlayStation domination!"

 

[BennyBlanco]

NeoGAF: "Consolidation is BAD! Microsoft shouldn't be ALLOWED to buy ABK! They'd make COD exclusive and RUIN gaming!"
Also NeoGAF: "Sony needs to buy Take 2! GTA6 as PS exclusive is the smartest move! Can't stop the PlayStation domination!"

 

[Mibu no ookami]

NeoGAF: "Consolidation is BAD! Microsoft shouldn't be ALLOWED to buy ABK! They'd make COD exclusive and RUIN gaming!"
Also NeoGAF: "Sony needs to buy Take 2! GTA6 as PS exclusive is the smartest move! Can't stop the PlayStation domination!"

You sound really salty...

 

[IntentionalPun]

I think there are many who still see Sony as a console company. That just isn't the case. Under Jim Ryan they're looking to turn PlayStation into a platform rather than a box.

This means Console, PC, Mobile, Cloud, VR, Movies & TV.

They don't have sufficient market share in PC or Mobile or even in Cloud.

I mean, I get it, but I still think they'll have more trouble w/ regulators than Disney has w/ their purchases because of how few are in the console market which is currently their main business. While the entertainment industry has a lot of consolidation.. it isn't a 3 player race.

 

[Kilau]

Watch them buy a bunch of music catalogs and invest in more phones that nobody wants.

 

[midnightAI]

Is Takashi Mochizuki/Bloomberg not a banned source of Sony news/rumours yet?

 

[bentanchorbolt]

If Sony were to purchase Take Two Interactive, that would be absolutely a juggernaut move and if I am being honest here its the move MS should have went after instead of the ABK deal. GTA, Red Dead, 2K Sports, Mafia, Bioshock, Borderlands, etc. Not to mention many of those IP's would translate extremely well to the silver screen via Sony Pictures.

I don't know, the deal makes perfect sense because as others have pointed out, no matter if you like consolidation or not, its happening and if you don't play the game the game will eventually play you.

 

[dotnotbot]

Fox made sense at that time, due to their business.
But this is take 2 which is quite limited to gaming. And they can't make their games exclusive as they will lose a lot of money in the process. And as you said, regulators won't approve this merge.

They have more benefits from square enix as that is cheaper option and can print alot of money and has immense connection with PS.

They wouldn't make them exclusive, just like Bungie games. Sony would buy Take2 so their games can't become exclusive to rival platform. And to have marketing rights for them of course and a lot of other benefits.

If Sony were to purchase Take Two Interactive, that would be absolutely a juggernaut move and if I am being honest here its the move MS should have went after instead of the ABK deal. GTA, Red Dead, 2K Sports, Mafia, Bioshock, Borderlands, etc. Not to mention many of those IP's would translate extremely well to the silver screen via Sony Pictures.

I don't know, the deal makes perfect sense because as others have pointed out, no matter if you like consolidation or not, its happening and if you don't play the game the game will eventually play you.

Yep, some great IPs for a movie or series.

 

[zomboden]

Microsoft doesn’t get to buy a publisher because cloud gaming “might” be big in the future, but Sony the market leader that is currently outselling Xbox 2:1 or 3:1 gets to buy one? Oh no, I don’t think so.

 

[bitbydeath]

Is Takashi Mochizuki/Bloomberg not a banned source of Sony news/rumours yet?

This one’s coming straight from Sony.

https://www.sony.com/en/SonyInfo/IR/library/presen/strategy/pdf/2023/press_E.pdf

 

[bitbydeath]

They wouldn't make them exclusive, just like Bungie games. Sony would buy Take2 so their games can't become exclusive to rival platform.



Yep, some great IPs for a movie or series.

That’s the one good thing, Sony probably couldn’t afford to make it exclusive.

 

[Captain Toad]

To me, companies like Take Two and Activision seem like high risks. Tens of billions for companies that the vast majority of their income comes from one major franchise.

What if something changes in the future and the public just completely loses its interest in GTA or Call of Duty? Not something that is likely to happen over night, but there's no guarantee they can maintain their dominance forever.

 

[Mibu no ookami]

I mean, I get it, but I still think they'll have more trouble w/ regulators than Disney has w/ their purchases because of how few are in the console market which is currently their main business. While the entertainment industry has a lot of consolidation.. it isn't a 3 player race.

How many major studios do you think there are now?

There are 5 major studios, but Sony is basically tiny now. The reality is to compete with Disney, Sony Pictures is going to have to buy/merge with someone.

You have Universal, Paramount, WB, Disney, Sony Pictures

Paramount is basically trash. Maybe Comcast could sell Universal, but I doubt it. Warner Discovery is worth 30 billion and obviously Disney is bigger than Sony.

Sony either needs to get bigger or they need to sell.

The same is true of PlayStation, but in a different way. They need to grow out of the box business.

 

[IntentionalPun]

To me, companies like Take Two and Activision seem like high risks. Tens of billions for companies that the vast majority of their income comes from one major franchise.

What if something changes in the future and the public just completely loses its interest in GTA or Call of Duty? Not something that is likely to happen over night, but there's no guarantee they can maintain their dominance forever.

Take2 makes more money from mobile gaming than they do console.

They bought Zynga like a year ago.