Sharp Falls as It Mulls Raising Capital to Boost Finances

Apr 14, 2014 5:18 am ET

(Updates with lockup expiration today in sixth paragraph.)

April 14 (Bloomberg) -- Sharp Corp., a supplier of displays for Apple Inc.’s iPhone and iPad, fell the most in more than 10 months after the company said it’s considering ways to increase capital.

Shares dropped 8.7 percent, the most since June 3, to close at 273 yen in Tokyo trading. Sharp is considering options and hasn’t decided on a method, it said in a filing to the Tokyo Stock Exchange yesterday. The company may raise about 200 billion yen ($2 billion) in the fiscal year ending March 2015, the Asahi newspaper reported yesterday without attribution.

Sharp forecast a return to profit in the last financial year on cost reductions and demand for solar panels, after posting a combined 921 billion yen of losses in the previous two years. Raising 200 billion yen would boost the company’s capital-to-asset ratio to as high as 20 percent from about 8 percent now, Asahi reported.

“The additional share offering news will have negative impact to its shares,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co. in Tokyo. “The company has not showed a clear way for becoming more profitable in its major display business.”

Osaka-based Sharp last year raised 137.7 billion yen through public and secondary offerings, including stock sales to Makita Corp., Denso Corp. and Lixil Group Corp., according to an earnings statement on Feb. 4.

Further Financing

Sharp said last year it would wait at least 180 days before conducting another round of financing. The sale of stocks took effect in October, according to data compiled by Bloomberg. The lockup period expires today, according to Miyuki Nakayama, a Tokyo-based Sharp spokeswoman.

Investors are concerned competition between display manufacturers is intensifying, said Akino, citing the initial public offering of Japan Display Inc.

Japan Display, which was created when Sony Corp., Toshiba Corp. and Hitachi Ltd. spun off their panel businesses to the state-backed Innovation Network Corp. of Japan, slumped 15 percent at its trading debut. That was the worst IPO of any Asia-Pacific initial public offering worth at least $1 billion since 2008.

Sharp, the maker of Aquos TVs, plans to unveil a new restructuring plan to help convince potential investors among financial institutions, Asahi said. The strategy will focus on cutting production costs at its Kameyama flat-panel factory in central Japan to expand into the market for lower-priced smartphones, it said.

--With assistance from Taku Kato in Tokyo.