TOKYO Shares in Sharp Corp (6753.T) tumbled as much as 15 percent on Wednesday to their lowest in almost 37 years, with investors spooked by predictions that the ailing Japanese TV maker's losses this year will be bigger than the company estimated this month.
Deutsche Securities and Goldman Sachs warned that Sharp, which is renegotiating a planned investment by Taiwanese contract electronics manufacturer Hon Hai Precision Industries (2317.TW) - agreed in March before Sharp's share slump - will this year lose up to 60 percent more than the company's latest estimate of 100 billion yen.
They also raised flags on upcoming financial hurdles that could see Sharp having to rely on its main banks, Mizuho Financial Group (8411.T) and Mitsubishi UFJ Financial Group (8306.T), to stay solvent.
Since releasing weaker-than-expected quarterly results on August 2 along with a bigger operating loss forecast of 100 billion yen ($1.3 billion), Sharp has seen close to $1.5 billion wiped off its market value.
The company, which makes screens for Apple Inc's (AAPL.O) iPad and iPhone, needs to refinance 360 billion yen ($4.57 billion) of short-term commercial paper and will need a further 200 billion yen in September next year to cover a maturing convertible bond.
"This level of funds cannot be covered from cash flow. If the firm gains bank support and funding, it likely will be essential to demonstrate an appropriate longer-term earnings plan," Deutsche Securities' analyst Yasuo Nakane said a report.
The last major fabricator of TV panels faces shrinking demand for its sets and lower than anticipated income for smaller LCD screens used in tablet PCs, noted Goldman Sachs' analyst Takashi Watanabe.
Sharp and local rivals Sony Corp (6758.T) and Panasonic Corp 6752. expect to sell around 10 million fewer TV sets this business year than in the previous 12 months as nimbler competitors such as Samsung Electronics (005930.KS) gain market share.
Deutsche's Nakane predicts a full-year operating loss of 159 billion yen, while Goldman's Watanabe estimates an operating deficit of 150 billion yen. The average estimate of 13 analysts surveyed by Thomson Reuters since the latest earnings release is for a loss of 131 billion yen.
The latest slide in the share price will add pressure on Sharp to concede ground to Hon Hai, which is looking for a better deal than the 550 yen per share it said in March it would pay for around a 10 percent stake in Sharp.
Deutsche's Nakane predicts Sharp will get a cash injection of just 22 billion yen from that deal rather than the 66.9 billion yen it was relying on to help it bolster its finances.
In a further sign that investors are more pessimistic about Sharp's fate, interest from short sellers - who make money on falling stocks by borrowing shares to sell and then buying them back at a lower price - is growing. That could trigger further declines in shares of the Aquos TV maker.
According to data provider Markit, 89.57 percent of Sharp shares available to be borrowed were already out on loan as of Monday, up from 88.28 percent last Friday.
Sharp closed down 12.4 percent at 169 yen.
The company's 5-year credit default swaps, insurance-like contracts against debt default or restructuring, were quoted at 1,181/1,413 basis points. Sharp has a 1-year default probability of 28.8 percent according to Kamakura Corp, up more than 4 percent on Wednesday.
($1 = 78.7900 Japanese yen)
(Reporting by Tim Kelly and Dominic Lau; Editing by Edmund Klamann and Ian Geoghegan)