Shares of Sony (SNE) dropped about 4% in Tuesday morning trading after its board shot down a plan to breakup the company.
Daniel Loeb, who runs Third Point, a hedge fund, had proposed selling stakes in Sony’s film and music units. On Tuesday, Sony’s board released a letter sent to Loeb rejecting the idea, and predicting that Sony Pictures and Sony music will become more profitable as digital media platforms expand, the Associated Press notes.
Sony has full ownership of both Sony Music and Sony Pictures. Loeb had suggested selling as much as a 20% stake in the units through a public offering in order to raise money to bolster its flagging electronics business.
However, Sony’s board called the film and music business “fundamental” to its long-term strategy and indicated it will obtain funding from other sources.
Third Point holds a 6.5% stake in Sony. Loeb has been promoting the idea of spinning off Sony’s music and film units since May.
Sony’s consumer electronic business, which once dominated the industry, has faltered over the last decade, hit with rising competition in the TV business and increasingly powerful electronics manufacturers from South Korea and China.
Under the leadership of new CEO Kazuo Hirai, Sony has been attempting to reorganize and revitalize its electronics business.