We recently sent a written communication to Subaru Corporation (Tokyo: 7270.T | ADR: FUJHY). https://devotioncapital.com/subarus-ownership-stake-in-toyota-shareholder-inquiry/
Our Japanese is rusty and the company does not appear to accept email communications from shareholders, so we have resorted to the modern equivalent of the Pony Express: a physical letter.
Our reason for writing is straightforward: to confirm the size of Subaru’s ownership stake in Toyota Motor Corporation (NYSE: TM | Tokyo: 7203.T).
What should be a simple question turns out to require a surprising amount of explanation.
At current prices, Subaru’s net cash and financial assets (as shown on their most recent balance sheet) amount to roughly 90% of the company’s current market value.
There is also a possible wildcard. Subaru owns a strategic equity stake in Toyota. Toyota, in turn, owns about 21% of Subaru and is its largest shareholder—a reminder of the long Japanese tradition of cross-shareholding among corporate partners, a system commonly referred to as keiretsu.
Valuing Toyota itself is not difficult. It is a roughly $300 billion company. The question is how large Subaru’s stake actually is and how that ownership is reflected in Subaru’s financial statements.
Here the information becomes murky. Some sources—including Wikipedia—suggest Subaru owns more than 3% of Toyota. Other sources indicate the stake is closer to 0.5%. The company’s own disclosures do not make the answer particularly clear, which is precisely why we wrote the letter.
To illustrate why the difference matters: if Subaru owned roughly 3% of Toyota, that stake alone would be worth on the order of $9-10 billion at current prices—almost as much as the entire current market value of Subaru itself. If the smaller estimate of roughly 0.5% is correct, the value would be closer to $1.5 billion. That is a very large difference indeed. Either way, we think Subaru is substantially undervalued. It’s a question of degrees.
We currently believe the lower Toyota ownership figure is correct, but we could be wrong and if the larger number were accurate, it would only make the investment case for Subaru even stronger.
Subaru currently holds roughly ¥1.7 trillion ($10-11 billion) of cash and financial securities net of all debt on its balance sheet.
A simplified view of the balance sheet looks roughly like this:
Where is the Toyota stake hiding?
| Balance Sheet items | Yen (approx.) | USD (approx.) |
| Cash | ¥941B | ~$6.0B |
| Current financial assets | ¥1,019B | ~$6.5B |
| Non-current financial assets | ¥145B | ~$0.9B |
| Total financial assets | ¥2.1T | ~$13.4B |
| Total debt | (¥0.4T) | (~$2.5B) |
| Net cash & securities | ≈ ¥1.7T | ≈ $10.8B |
Embedded within these financial assets is Subaru’s equity stake in Toyota, which is precisely the figure we are attempting to confirm.
For context, Subaru Corporation (Tokyo: 7270.T | ADR: FUJHY) currently has a total market value of roughly ¥1.9 trillion (~$12 billion).
Even using conservative assumptions, however, the arithmetic already looks unusual.
At today’s price, the market is essentially paying for the balance sheet and giving investors the operating business for free.
That operating business—the one that actually designs, manufactures, and sells cars—generated roughly $1 billion in cash last year.
Stated another way—Investors today are paying barely more than one year’s cash flow for Subaru’s entire global automobile franchise.
Importantly, this situation did not arise because of tariffs, economic uncertainty, or geopolitical tensions. This valuation predates those concerns. If anything, recent headlines have simply deepened the malaise surrounding the shares. The more fundamental issue appears to be neglect and a surprising lack of analytical attention paid to the company’s balance sheet.
Perhaps Subaru’s management should also pay attention to catalysts for unlocking shareholder value. But this is for another letter on another day.
If investors were to fully recognize the value of Subaru’s balance sheet assets and its operating business, we believe the company is worth at least $20 billion. This is not a pie-in-the-sky projections based on a rosy future. It is not based on what Subaru might be worth someday—it is what we believe the business is worth today based on the assets they already own and the profitability of the operating business.
With roughly 715 million ordinary (Japan equivalent) shares outstanding, that would imply approximately:
- $28 per share, or roughly ¥ 4,400 on the Tokyo exchange
- $14 per ADR for FUJHY, which represents half an ordinary share
For context, Subaru currently trades around:
- ¥2,670 per share in Tokyo
- ~$8.40 per ADR in the United States
Our valuation would imply roughly 60-70% upside from current prices.
Simply shining a brighter analytical light on Subaru’s balance sheet may go a long way toward closing that gap.
Devotion to Active Ownership.
Disclosure: Devotion Capital clients and the author own shares and/or ADRs of Subaru Corporation (Tokyo: 7270.T | ADR: FUJHY).
