TOKYO Oct 7 Shares of loss-making Japanese electronics company Sharp Corp slid to a near six-month low on Monday ahead of the pricing of a $1.5 billion share issue that some fear could wipe close to a third off the value of existing investors' holdings.
By the midday break in Tokyo trading, shares in the supplier of panels for Apple Inc's smartphones were down 5 percent at 301 yen, heading for a sixth straight day of losses and the stock's worst run in three months.
Sharp is widely expected to price later on Monday a public offering of 450 million new shares to raise 148.9 billion yen ($1.5 billion), repaying some of its crippling debt to stabilise finances a year after a $4.6 billion bank bailout. At its latest stock price, Sharp's market capitalisation was about $3.87 billion.
Like Japanese peers Sony Corp and Panasonic Corp , Sharp has been squeezed in recent years by a strong yen undercutting the competitiveness of its exports, and rivals like Apple and Samsung Electronics' success in launching hit electronic gadgets like smartphones.
Last year Sharp posted a 545 billion yen net loss, which pushed its capital below 6 percent of equity, well short of the 20 percent ratio widely seen as a financial-stability threshold for manufacturers.
Sharp investors' minds were concentrated on working out how the new share issue will affect their stock.
"It depends on how people calculate dilution. We calculate at 30 percent this time around ... It has been well expected but the impact is still quite significant to current shareholders," a senior dealer at a foreign bank in Tokyo said.
"Inevitably, the share price is going to go down quite significantly. But once the deal does come out, a lot of people say: 'Sell the rumour, buy the fact.'"
The dealer added that the overall Tokyo market has been weak as a U.S. budget standoff drags on.
Demand has been solid for the issue, according to Deal Watch, a Thomson Reuters publication, citing market sources. The domestic retail portion accounts for two-thirds of the offering.
Sharp will also raise 17.5 billion yen through third-party placements to partner firms Lixil Group, Makita Corp and Denso Corp.
Short-selling interest in Sharp hit a 4-1/2 month high, with 10.93 percent of its outstanding shares out on loan as of Oct. 3, according to data provider Markit.
In the first half of the financial year ending in March 2014, Sharp's business has been boosted by the yen's weakening and stronger-than-expected demand in solar batteries and other products. The company raised its business forecasts for the half year through Sept. 30, doubling its operating profit forecast to 30 billion yen. It halved its net loss projection to 10 billion yen.
The display maker now expects to lose 8.52 yen a share for the six months, narrowing the prior forecast of a loss of 17.15 yen a share. ($1 = 97.1350 Japanese yen) (Reporting by Dominic Lau; Editing by Kenneth Maxwell)