Sharp shares plunge on capital reduction reports


Sharp Corp. shares briefly tumbled by the daily limit of ¥80 on the Tokyo Stock Exchange on Monday morning, to slip below ¥200 for the first time since December 2012.

The 31 percent fall to ¥178 per share came following reports that the struggling electronics giant is planning a drastic capital reduction to help wipe away losses.

Sharp later recovered ground to trade at ¥195, down 24.4 percent, by the break.

Weekend reports by the leading Nikkei business daily and other domestic media said Sharp plans to reduce its capital by 99 percent to just ¥100 million, the upper limit for the category of small and midsize companies with tax advantages.

The Osaka-based company — a major supplier to Apple, a leader in screens for smartphones and tablets — also plans to use surplus money squeezed out of the capital reduction to wipe away years of accumulated losses, the reports said.

The move, unusual for a firm that has not gone bankrupt, comes as it struggles to move past years of gaping losses, partly due to bleeding in its TV unit, which has been hammered by competition from regional rivals.

Responding to the media reports, Sharp on Monday said a capital reduction remains an option as part of its wider restructuring.

“As for our capital policy, we have been making various considerations including issuance of preferred shares and a capital reduction but there has been no decision made,” the company said in a statement.

Sharp is to announce a mid-term business plan Thursday along with its earnings results. Reports said Sharp is also expected to get financial assistance from its creditors, such as swapping debt for preferred shares with no voting rights.

“Investors may be afraid that preferred shares, if converted into common shares, would dilute stakeholders’ rights,” said Toshihiko Matsuno, senior strategist at SMBC Friend Securities.

Matsuno added that Sharp has yet to announce a clear plan.

“While there are so many uncertain factors, the stock has become a target of the money game,” he said, referring to speculative trading.

For the reported capital cut, Sharp will need to get approval at a general shareholders’ meeting in June.

Earlier this year, the Nikkei said Sharp is considering closing four domestic factories that produce electronic components, as well as withdrawing from its solar cell business.

As the company writes off production equipment in unprofitable businesses, its net loss for the year ending in March is likely to exceed ¥100 billion, up from the company’s own loss forecast of ¥30 billion, the business daily said.