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Stock plunges on Daiwa plan
By Tomoko Hosaka |
June 30, 2009, Tuesday
|
Print Edition
Print Edition
SHARES of Daiwa Securities Group Inc, Japan's second-biggest securities company, plunged more than 12 percent yesterday after the company announced plans to raise about 240 billion yen (US$2.5 billion) in a public share offering.
The Tokyo-based brokerage said after market close on Friday that it would issue up to 345 million new shares from July 15 to July 21. It will use funds raised to bolster its retail business and presence in Asia and emerging markets.
The news stunned investors, who sent the issue down as much as 15 percent at one point amid share dilution concerns. It closed down 12.1 percent at 587 yen compared with a 1 percent drop in the benchmark Nikkei 225 index.
Meanwhile, a report about a new share sale by Mizuho Financial Group Inc further unnerved the market and sent the Nikkei into negative territory in the afternoon. Japan's No. 2 bank is preparing to issue about 600 billion yen of shares as early as this week, sources said.
Investors knew that Mizuho wanted to raise capital, but yesterday's report on the possible timing of an offering renewed concerns. The issue lost 3.4 percent to 229 yen.
Mizuho declined to comment.
Analysts called Daiwa's move disappointing and abrupt, especially because Daiwa until recently had indicated it had sufficient capital.
Credit Suisse maintained its "outperform" rating on the stock but said it was now recommending Nomura Holdings Inc as its top brokerage pick.
"At least until the company explains its growth strategy and provides details of the actual use to which the funds raised in this capitalization will be put, it is difficult to be positive on the news," analyst Azuma Ohno said.
The share offering comes as Daiwa faces increasing competition at home and abroad. Last month Sumitomo Mitsui Financial Group Inc said it was to take over Citigroup's Japan securities business - Japan's first acquisition of a leading brokerage by a bank.
The total offering, which includes 58 million treasury shares, will expand the number of Daiwa shares outstanding by about 30 percent, the company said.
Daiwa posted a net loss of 85 billion yen in the fiscal year to March 31.
The Tokyo-based brokerage said after market close on Friday that it would issue up to 345 million new shares from July 15 to July 21. It will use funds raised to bolster its retail business and presence in Asia and emerging markets.
The news stunned investors, who sent the issue down as much as 15 percent at one point amid share dilution concerns. It closed down 12.1 percent at 587 yen compared with a 1 percent drop in the benchmark Nikkei 225 index.
Meanwhile, a report about a new share sale by Mizuho Financial Group Inc further unnerved the market and sent the Nikkei into negative territory in the afternoon. Japan's No. 2 bank is preparing to issue about 600 billion yen of shares as early as this week, sources said.
Investors knew that Mizuho wanted to raise capital, but yesterday's report on the possible timing of an offering renewed concerns. The issue lost 3.4 percent to 229 yen.
Mizuho declined to comment.
Analysts called Daiwa's move disappointing and abrupt, especially because Daiwa until recently had indicated it had sufficient capital.
Credit Suisse maintained its "outperform" rating on the stock but said it was now recommending Nomura Holdings Inc as its top brokerage pick.
"At least until the company explains its growth strategy and provides details of the actual use to which the funds raised in this capitalization will be put, it is difficult to be positive on the news," analyst Azuma Ohno said.
The share offering comes as Daiwa faces increasing competition at home and abroad. Last month Sumitomo Mitsui Financial Group Inc said it was to take over Citigroup's Japan securities business - Japan's first acquisition of a leading brokerage by a bank.
The total offering, which includes 58 million treasury shares, will expand the number of Daiwa shares outstanding by about 30 percent, the company said.
Daiwa posted a net loss of 85 billion yen in the fiscal year to March 31.
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