Sharp Corp plunged the most in Tokyo since 2012 after the debt-saddled display maker for Apple Inc said it is considering reducing capital and issuing preferred shares to shore up the balance sheet.
The shares slumped 26 percent, the most since August 2012, to ￥190. A decision on the company’s capital will be released as part of a mid-term plan to be announced on Thursday, the company said yesterday.
Sharp will cut its capital by more than 99 percent to ￥100 million (US$834,000) and issue preferred stock, a person familiar with the matter said, asking not to be identified ahead of a public announcement.
Photo: AFP
That would erase accumulated losses on the balance sheet and help lower Sharp’s tax rate as the company faces a loss that some analysts predict could exceed ￥200 billion for the year.
“The main purpose of the capital cut in Sharp’s case is to erase retained losses and make the company able to distribute dividends again,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “The issue here is that it’s likely to be issuing preferred shares at the same time, so there is dilution concern. Preferred shares would have priority in receiving dividends.”
The Nikkei Shimbun reported the planned capital cut earlier.
Sharp’s two main lenders agreed in principle to a debt for equity swap to assist the struggling electronics maker, people familiar with the matter said in last month.
That plan included Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc swapping about ￥200 billion of debt for preferred equity, the people said.
Sharp would remain listed on the first section of the Tokyo Stock Exchange after the capital cut, the person said.
Stocks listed on the first section must have a market value of at least ￥25 billion, according to the Japan Exchange Group. Sharp currently has a market value of about ￥330 billion.
The Osaka-based supplier of displays to Apple Inc is heading for a third loss in four years and said previously it is considering “drastic reform.” The company has ￥978 billion of total debt, according to data compiled by Bloomberg.
Sharp probably had a net loss of ￥1 billion in the 12 months ended March, according to the average of 12 analyst estimates compiled by Bloomberg.
That loss could exceed ￥200 billion, Yasuda said. In the previous two years, Sharp lost a combined ￥921 billion.
“Dilution concerns are weighing on the share price,” said Yasuo Sakuma, portfolio manager and executive officer at Bayview Asset Management Co in Tokyo.
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