Sony considers financial services spinoff and listing, shares surge; BofA positive on growth

Investing.com — Japanese conglomerate Sony Corp (NYSE:) said on Thursday that it is considering a potential spinoff and listing of its financial services unit within the next two to three years.

The announcement saw Sony’s (TYO:) Japanese shares surge 6.4% in the Asian trading session.

Sony said it will assess the spinoff and listing of Sony Financial Group, its wholly-owned unit, with the intent of facilitating “sustainable growth” in the business. The unit is likely to be listed in Japan, Sony said in an announcement.

Sony Financial Group was founded in 2004 and offers services such as insurance, banking, and venture capital investments.

The Japanese media-to-technology conglomerate said that it will hold a stake of slightly less than 20% in the spinoff, and that it will consider distributing the remaining shares in the unit to shareholders as a dividend.

The move comes as Sony doubles down on its core entertainment business that produces movies, music, and videogames, as well as its image sensor business. The firm is one of the world’s biggest videogame makers, and is also a key supplier of image sensors for smartphones.

Sony logged a record-high annual revenue for 2022, while profit also beat expectations on strong sales from its chip division, as well as higher-than-forecast sales of its flagship PlayStation 5 console. The console has sold nearly 40 million units since its troubled launch in 2020, and has vastly outpaced Microsoft Corp’s (NASDAQ:) Xbox Series X.

Sony’s gaming business is expected to be the conglomerate’s key breadwinner this year, with the company pinning its hopes on the second generation of its PlayStation VR virtual reality gaming headset.

The company is facing a potential downturn in its image sensor division, especially amid waning demand among Chinese smartphone makers. A broader slowdown in chip demand across the globe is also expected to dent margins in the business.

Bank of America analysts reiterated a Buy rating on SONY shares as the updated corporate strategy could act as a catalyst for faster growth.

“We have a positive impression of Sony’s corporate strategy meeting held on 18 May morning. This is because Sony 1) announced that it is considering partially spinning off the financial services business, which has few synergies with other businesses, 2) said that the scale of its in-house non-consolidated business is lacking compared with global competitors, so it could take active steps to close that gap, such as M&As in the future,” the analysts said.

New York-listed Sony shares are up 3.7% on Thursday.

(Additional reporting by Senad Karaahmetovic)