Sonus's biggest fan
Crowds haven't been lining up to buy shares of Sonus Networks Inc. this summer, especially since the Westford telecommunications company warned in July that its sales growth would probably slow down.
The obvious way it shows: Sonus shares have lost more than a third of their value since June 30. Fans of Sonus stock are few and far between at the moment, but one of them continues to buy with a voracious appetite and the money to back it up.
Legatum Capital showed up in public as a Sonus investor six months ago, when it disclosed owning nearly 6.5 percent of the company. Legatum doubled its stake over the next two months, then started buying even more aggressively once Sonus shares slumped. It bought at least a million shares a day in seven straight trading sessions as prices fell. By the time it bought another 2 million shares on Friday, Legatum owned nearly 22 percent of Sonus.
So, who are those guys? Legatum isn't a mutual fund firm or big hedge fund operator. It doesn't appear in public documents as the owner of any other US stock.
Legatum Capital is a money manager that exists to invest for one man, one very rich man who started in the hinterlands of New Zealand 20 years ago and ended up in Dubai, via Monaco. His name is Christopher Chandler, and if he's known for one other thing besides a wildly successful investment career, it's the ultralow profile he and his brother Richard maintained while amassing fortunes.
The brothers Chandler, both in their 40s, turned $10 million into billions by concentrating their investments in a small number of contrarian bets. They worked together for years, but split up last year for undisclosed reasons. Christopher Chandler took his half of the money, perhaps a couple billion dollars, and began managing it via Legatum Capital.
The brothers started investing when they sold a department store created in rural New Zealand by their parents and related retail businesses. They took the $10 million raised and invested most of it in Hong Kong real estate for their first big profit, according to an interview Richard Chandler gave to Institutional Investor magazine last year.
The Chandlers focused next on stock investments in Brazil, amid hyperinflation, that also paid off handsomely. They moved on to Eastern Europe, attracted by the region's move toward capitalism, with modest financial success. Next, they began buying Russian stocks and eventually owned nearly 5 percent of Gazprom, the giant gas producer.
The brothers probably made their most profitable bets buying down-and-out Japanese bank stocks in 2002. Later, an investment in a big Korean oil company produced outsized profits.
Sonus represents another concentrated investment. It's hard to say how much Legatum spent to buy its first 16.9 million shares, but it probably shelled out about $300 million for the next 40 million shares. The brothers have shunned leverage in the past, and it's unlikely Legatum borrowed much to buy Sonus stock.
In a response to written questions, a Legatum executive said Sonus fit with its "patient, value-oriented" investment approach. Sonus, with annual sales of about $300 million, makes software for Internet-based phone calling.
"Legatum's investment in Sonus Networks reflects our belief in the company's long-term future," said Alan McCormick, of Legatum Global Development. "Sonus is building the communications platform for the future."
The good news for Sonus: Chandler has a history of shareholder activism, but only in extreme cases. On the other hand, Legatum has become an 800-pound gorilla waiting patiently for a technology revolution and expects Sonus to lead, not follow.
BOSTON CAPITAL BLOG Steven Syre is a Globe columnist. Read his daily blog at boston.com/business. He can be reached at syre@globe.com.
