Patrick Shiong Soon, #145 on Forbes' World's Billionaires list, has a net worth of about $8 billion. Soon is a self-made billionaire, who built his fortune in the biotech industry and has added to it by building up companies and selling them.
Unsurprisingly, given the net worth he has amassed, he has a record of producing big winners. That’s what makes his big loser in Jakks Pacific so interesting.
Soon is down more than 50% on his investment in the toy company. He owns more than four million shares at an average cost of $11.04, according to SEC Filings. Jakks is currently trading around $5.19. Soon added to his initial stake in July just before the stock plunged. Then he added more in the $7 area, taking his total stake to 25% of the company.
In our research at BillionairesPortfolio.com, we have found buying the dip on a billionaire to be a very powerful strategy. It’s always good to have an influential shareholder that has controlling interest in a company on your side, especially when you can buy in at a discount to what they paid.
When a rich activist investor is involved in a stock, sitting on a loser tends to make them very impatient, and that can speed up the timeline of their game plan to unlock value in a company. They tend to take their influential position, as a large shareholder, to control their own destiny. That might include shaking up management, pushing management to exit poor performing businesses, forcing asset sales or pushing for a sale of the company all together.
Now, Soon’s brand of activist investing is different than that of a Carl Icahn or Bill Ackman. He’s not an antagonist activist. Soon creates value, working with companies, by being a great visionary, innovator and deal maker. But he has yet to produce value for shareholders, including himself.
Jakks has been an innovator in toy technology through their partnerships and proprietary assets. Their “DreamPlay” has innovated toy marketing by brining toys to life through interactive animation apps. Through Soon, though, the company has secured major deals with Disney to produce these animations on the stable of Disney characters and toys. And based on its latest filing, Jakks may very well be in the process of divesting their traditional toy business and morphing into a technology company. In that case, we could be looking at a company that will be in the licensing business, with a valuation multiplier twice that of a traditional toymaker.
Many beaten down companies have their problems and opportunities. The story for this stock is the presence of a powerful billionaire investor who has shown continued commitment to this company. If Dr. Soon’s track record is any indication, we expect his efforts to translate into shareholder value creation. With that, Jakks looks like an attractive bet.
Bryan Rich is co-founder of BillionairesPortfolio.com and CEO of Logic Fund Management, Inc.
