Digital Garage was always of special interest to us, as the famous Joi Ito is one of the co-founders, and became even more so when activist investor Oasis Management threw down the gauntlet at the end of 2022, proposing “A better DG”.
To recap, Oasis was proposing that Digital Garage should:
- Spin-off the Financial Technology and Marketing Technology segments to create DG Financial Technology, expanding the payment service provider business;
- Operate the remaining business as DG Investments, expanding startup and venture capital investments; and
- Divest its shares of Kakaku.com, Inc. (“Kakaku”).
In response, Digital Garage continued with its strategy “DG FinTech Shift”, which combines the Digital Garage Group’s three largest assets in Japan: “Payment Platform,” “Media Business,” and “Overseas Investment Business” based on the purpose of “Designing ‘New Context’ for a sustainable society with technology.”
Instead of divesting Kakaku.com, like Oasis suggested, Digital Garage doubled down on the restaurant website, and aims to ride the foreign tourist boom for its growth.
To illustrate how this strategy has worked out to date, the graph from Yahoo! Finance above shows the performance of the Nikkei 225 and Digital Garage since December 1, 2022, with the former appreciating by 26% over this term, and the latter giving up 33%. Little surprise then that some call Digital Garage’s board “dysfunctional”. So when you read the earnings report, please keep this in the back of your mind.