YouSaid · the spoken record

David Baran

lines on the record: 79
first: 2021-02-08
most recent: 2021-02-08
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“And it's not because the Japanese were hiding anything, it's the rules for how you marked things and disclosed things were very different. For example, you didn't have to mark to market your securities portfolio. So these companies have massive amounts of stock that had gone up five times from when they bought it 50 years ago. It was on their book at acquisition costs. Real estate, even now if you're not a real estate company, you don't have to market up. But they could have owned real estate and shofu, which owned real estate next to Nintendo. They had it on their book at, I think it was, like $2 million? Was worth like $200 million. Well, why don't you mark it up? I'm like, why would we do that”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it may be that management doesn't want any more shareholders. It may be that they don't have an IR department, so they wouldn't even know what to do. There's always some kind of anecdotal story as to why a particular company trades at the really wrong price. Underneath the overall umbrella that, well, it doesn't need to be listed. So we found companies through just hard work. You can screen for cheap all day because that's a calculation. And actually, when we started, one of the things that we found ourselves doing a lot, and it somewhat became a tagline for us, was balance sheet forensics.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Literally it was the Willy Loman strategy. We filled up our backpacks with our laptops, put on our best loafers, got some power bars. What were we eating back then? Calorie mates. And we get on the train and we go to Osaka, we'd go to Nagoya, and we'd meet and meet and meet and meet. Every day we'd be traveling on the country trying to meet with these management teams to try and understand what the hell is going on. Because, I mean, none of this is on the balance sheet or the income statement. There's some reason, and trust me, there is a reason why the company is”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you look at this landscape on paper at the time it probably felt like shooting fish in a barrel, but as you said, most of these companies had this big disconnect. How did you go about figuring out which ones you could work with to try to extract some of the value from the business”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when you put those two together, then you have a dialogue that becomes, well, why wouldn't we be listed? I get to be a member of the Lions Club as the president, or I get this prestige, or they'd always use some nonsense. We get better bank financing being listed. I mean, all these things are like, well, yeah, you get better bank financing, but you're 130% net cash-to-market cap. Why are you borrowing money? None of these things really made sense, although the arguments were tried and true. So merging these two concepts very difficult, I think, for a lot of either all Japanese teams to understand or all Western teams to understand.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“And in the absence of a unregulated, unfettered market for corporate control That is a very difficult concept. To impose upon a management team that's never had to deal with the stock market. They're like, why do we care about shareholders? Well, because it's not really about shareholders. I mean, it's about you. Then why are you listed? You listed, and when you did that, when you took that action, Unlike in the US or in Europe where I'm listing because I need a liquidity event or I need to raise cash, that's generally not the case for the large majority of the cheap companies. They're listed as some kind of legacy. They may retain the cash they got when they IPO because they got nothing to do with it. So there was kind of this strange mystery as to why you're listed.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Symphony happened literally because we realized that the forces that drive the company and the forces that drive the stock market are too completely alien concepts. Management's good, the company is good, share price is bad. And management would be like, well, we're not in charge of the share price because we don't trade stock. So we realized that while anybody doing their financial gymnastics and saying, well, I can buy this company and do it, no, you can't. I mean, it's trading there, but you can't buy it. And that concept for people is like, well, what do you mean? I said, well, yeah, you can buy $50,000 worth of stock or $100,000, but you can't buy the company there. And there's no real mechanism by which you can go into the market, buy it, and then be able to get that arbitrage. So what we realized was that despite the mispricings, the only way to actually profit from it was to work with the company to get the pricing of the shares to more accurately reflect the value of the company.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“For example, after Vaniatal School, that does not make you a real lawyer. By going through a period of negotiation and documentation and fighting with the lawyers, you will become better investment banker. If I stay with Nomura, I will be a real estate guy. That's not what I want to do. So that's a year 2000. I say. And Nomura cannot provide me any exciting opportunity where I can develop my ability. Okay, I will quit.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“So buying Japanese company is not that easy because of that concept. If you are corporate radar, especially to employee or management. People will oppose you. Shareholder is lowest ranked in Japan. I should say past the tense, not Crantense. Shareholder was a lowest ranked. So the total stakeholder shareholder is bottom. That has been a long time concept. Japanese community getting out of a community and going to be rich, you'll be kicked out. Well, once I left Anomura, people were, my colleagues were a friend I thought communicate less and less.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the things I was shocked at having lost good to learn in that Well, the company belongs to shareholder. That's what I was told at Habal When I went back to Japan, company belonged to employees. Work for no more, and joining a company means joining a society, community, you belong there forever, that you have a party within the department among the company or exercise baseball game and so on. So you are closely tied up. It's community and management They are not coming from outside they are one of us from management viewpoint employee is my friend my colleagues my junior so it's pretty tough for example Japanese management that you will get golden parachute and will buy your company and fire everybody that's not acceptable to Most of the Japanese, because they are my friend, I'll be ashamed in a community.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're not interesting. You're not in cloud services or electric vehicles or whatever it was at the time that would have caught everybody's attention. You're a nice, boring business that's just a cash cow and you have nothing else to do with your cash. It's like, ooh, that sounds like exactly what we want to own for ourselves”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's say we started, you had been there like 16 years, and then it took another two years to get out of there. And the objective at the time was, look, these are companies we want to own for ourselves. Good businesses. We don't want to fix businesses. We don't know how to make anything. We're comfortable in that position. Okay, but we understand that somebody is selling your stock at a discount to cash. Somebody's trading. And whether it's, as we said before, the pension funds dumping or not, it doesn't matter. Nobody cares what you do. Nobody cares about your operating business. You're just not a sexy name.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“95, 96. So nobody knew what the hell a Japanese reit was. This would be a reit with already losses in it, so it's like perfect. It was like $50 million of free money. So as we started looking at this, he and I talked about a number of other opportunities in the marketplace and what was going on. It was somewhat perversely I was the Japanese equity guy and he was the banker. the fullness of time we started looking at and talking about different things it's like why don't we just buy these for ourselves I can tell you what we need to buy you figure out how to close it let's go do it so it took a while to pry Shabbat San out of the moor I mean you were at the time”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Why doesn't this happen? And it got me thinking that the long-term investment in deep value names in Japan probably is the best place to put your money. I don't want to trade stocks. I want to buy the whole business. Because if I can buy the business for the cash on the balance sheet, they're giving it to me. Why wouldn't I want an operating business? And that sort of got me, and Shabbatasan together, because when we met, he was working at Nomura, and we were across the table from each other, working on a transaction. And, you know, it was kind of an interesting transaction. It was kind of small property developer who was having trouble, and I was working for a US hedge fund. And we were like, well, we should buy this company and we can take these net loss carry forwards and convert it into a backdoor reit. And remember, this is...”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are some companies trading at a discount to cash, which I couldn't understand. I get the arbitrage thing, but how could the stock market allow real operating business to trade at a discount to cash? That can't be right. I mean, if I step back and just do this simple math, discount the cash, I buy the company, and I give her the cash to myself, and I have an operating business. And you guys can keep the operating business. I'll keep the cash. Pretty basic stuff. And this was not like Phantom Cash or things that were tax maneuvers or any kind of accounting. It was cash sitting in a bank or as a portfolio of securities. So I spent quite a number of years actually trying to understand both how and why the stock market was discounting so many of these companies. And there were literally hundreds of them and why nothing was being done about it.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“When it first started, obviously I'd spent a lot of time doing arbitrage, buying cash, selling futures or options arbitrage. So things kind of made perfect sense. I'm going to buy one asset and sell another. I'm going to make an expected return. And in that process, I was requested to do a lot of basket pricing and things like that. And noticed that”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“1986 to 1990 there is a professional shareholder. And we need to protect the management so that Well, we practice how to run AGM, how to answer any question. I came to understand all the tricks of shareholders meeting and shareholders' rights. During that time”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Forget, you were the one prepping management on all those shareholder meetings, the more of management to make sure that they were ready for whatever dastardly conversations took place.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“And at that time Japan student coming from Japan is the largest group that's just booming. Even small legional bank send students to Habad Vosk. Amazing. I graduated in class of AD six. And I happen to be a first Haba Law School graduate and first New York lawyer in Numera's history. I was supportive backed bond trading department, but I was assigned to corporate planning department where to consider numerous the strategy. Once I return to Japan, because of my background of international negotiation, I assigned to a department where Noma advising Japanese corporate. Which wants to develop their business outside of Japan? And naturally, I led that deal. They negotiate on behalf of the client. And so my background is always advising Japanese management fast management then.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Join on NORAC Securities 1982 University and I was assigned to bond trading department. And then Nomura has a scholarship program which will send young employees to Obashi's schools like Habad or Yale and I was chosen. Even though I wanted to go to MOBA course, I was chosen to go to Haval School.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, as pension funds started to blow up. Now into probably the late 90s, early 2000s, and you've got another crash. You've got the Asian financial crisis in 97, and you're watching all these things bounce around and Japanese pension funds are just wildly undercapitalized. You got to this period. The government drew a line in the sand and said, okay, we can't have you guys going bankrupt anymore because we're going to have to pay for it anyway. So instead of you managing the money, why don't you give us the liabilities and we'll manage the money? And that was really the beginning of the end. Because for some god unknown reason, the government said, We don't want to take your assets, we'll take your cash. So everything was converted into cash and there was no price sensitivity at all.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Banks realized how weak they were, and the government said, we've got to do some consolidation, we've got to clean up all these balance sheets. That was the real stake in the heart for Japan as number one kind of mentality. As you kind of work through that, you were able to understand the ineffectiveness of the stock market to be a place for discovery of value. The stock market was not the arbiter of price. Trust banks trading or insurance companies trading around had nothing to do with what's this company worth. And that really was kind of the start of the realization, I think, for Japanese regulators to understand, hey, we've got a real problem with the pension funds. And they're levered into it, and they're just making the wrong.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“When we went through the bubble and then sort of came out of it, there was a lot of soul searching going on in Japan. And that didn't really happen until the mid-90s. The bubble burst in 89, 91, and you realized how weak the banks were.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“friendly yet adversarial relationship it was like you never could quite figure out are we working together we working against each other i was at Lehman obviously the big relationship was nip on life and as an employee we're like so do we work for nipple life or are they partners or what are we doing and we always have nippon life guys in the office and training them so it permeated kind of all parts of both business and social activity You're an expat here in Tokyo, you've got your job and then you've got your social life and you're sort of in and out of regular society, but you very much knew you were a guest. And the expectation was that you were not permanent. You were going to be there for three years or five years and then you're gone. Doesn't really matter. Surprise, surprise. That was in the 80s.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Japan was economically very powerful. Number two to the US. There was a lot of catering to Japanese financial institutions by U.S. financial institutions. There was quite a bit of fear amongst US institutions and corporations, makers, car makers, agriculture, whatnot. How are we going to defend against the onslaught of Japanese financial power coming into the United States and buying everything? Rockefeller Center, it was a strangely”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“pen in the 80s it was the bubble economy everything was very go-go money was sloshing around real estate was going through the roof stock market was going through the roof and was going through the roof in kind of all the wrong ways because people were borrowing against their real estate to buy stocks and borrowing against their stocks to buy more stocks it was all kind of a recipe for disaster which of course when they burst the bubble that's what happened but the markets where I operated arbitrage and futures and whatnot they made no sense and”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“So when I graduated, boarded a plane for Tokyo, sat down at the desk and shared something in Hutton, I think, right when Nippon Life purchased steak in the company, and that was the start of everything.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Beginning. Well, actually, I got to Japan from the family moved here. I was at Loyola in Los Angeles as a film major. For McCann Erickson Hakuhodo. This was Loyola had a reciprocal relationship with Sophia being Jesuits. I arrived summer of eighty one. Have been here continuously since then. I went to Sophia for a few. year and a half then went back to Finish up my degree. Cal was very flush with Japan experts. That got me straight. Columbia almost segued from one to the other, which of course elevated the level because my professors at Columbia in the grad school, Kew Patrick Jerry Curtis and all the people who have deep tentacles into Japanese politics and business.”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source
“Guests on today's show are David Barron and Kazuhiko Shibata, co founders of Symphony Financial Partners, a 20-year-old Asia-based manager of $1.3 billion in assets. Symphony focuses on deeply undervalued companies in Japan, with a long bias, constructive engagement strategy that works closely alongside willing management teams to see intrinsic value reflected in the share price. Our conversation covers their early careers in Japan, the country's employee-first shareholder last culture, the resulting disconnect of corporate activity and share price, and the formation of symphony to invest in the few companies willing to close the gap over time. We then walk through their investment process, including the challenges of taking advantage of what appears incredible value on paper, offering friendly advice as a key component of due”
2021-02-08 · Capital Allocators · David Baran and Kazuhiko Shibata – Friendly Activism in Japan at Symphony (Capital Allocators, EP.176) · IDENTIFIED FROM THE TRANSCRIPT · source