Japan's Sharp ditches $2 billion share issue plan after investor backlash

TOKYO (Reuters) - Japan’s Sharp Corp scrapped a plan to issue up to $ 2 billion in new shares, changing its mind in a matter of weeks after the initial announcement prompted investors to dump its shares on fears of earnings per share dilution.

FILE PHOTO: A logo of Sharp Corp is pictured at the CEATEC JAPAN 2017 (Combined Exhibition of Advanced Technologies) at the Makuhari Messe in Chiba, Japan, October 2, 2017. REUTERS/Toru Hanai/File Photo

In a statement on Friday, Sharp cited worries about trade frictions between the United States and China. “Due to increasing market uncertainties, the company decided that carrying on with the plan to issue new shares would not yield maximum benefit for shareholders,” it said.

Sharp shares rose 17 percent by early afternoon as investors cheered the about-face. The plans to issue new shares, announced on June 5, had sparked a sell-off on the market as they would have eroded Sharp’s earnings per share by about 20 percent.

“The shares fell after the announcement, so they decided to quit. It’s that simple,” said Masayuki Otani, chief market analyst at Securities Japan.

“To announce a new share issue, and then say ‘we changed our mind’ because the shares fell... that’s not common but not unprecedented.”

Sharp had previously said it would use funds from the new shares to buy back preferred shares that were issued to banks in return for a financial bailout in 2015. The plan was finalised just a week ago.

FILE PHOTO - A logo of Sharp Corp is pictured at CEATEC (Combined Exhibition of Advanced Technologies) JAPAN 2016 at the Makuhari Messe in Chiba, Japan, October 3, 2016. REUTERS/Toru Hanai/File Photo

The company had tried to persuade investors that the issuance would benefit them in the long run, saying dilution would be more if the preferred shares were converted into regular stock.

Sharp’s shares sank 21 percent since the June 5 announcement until Friday’s open, compared with a 1 percent fall in the broader Tokyo stock market over the same period.

The company said it would continue to discuss with the banks to dissolve the preferred shares.

Sharp has been showing signs of recovery under Taiwan’s Foxconn, the world’s biggest contract manufacturer which is formally known as Hon Hai Precision Industry Co Ltd.

It recently posted its first annual net profit in four years, helped in large part by cost cuts but also by Foxconn’s sales network in China. It has also said it will buy Toshiba Corp’s personal computer business for $ 36 million.

Some analysts said the Osaka-based electronics maker had become more decisive and responsive to shareholders since it was taken over by Foxconn two years ago.

“My impression is that Sharp has really changed as a company,” said Hajime Nakajima, chief strategist at investment advisory firm AsLink, adding the management’s decision on the matter was a speedy one.

Reporting by Makiko Yamazaki; Additional reporting by Chang-Ran Kim, Shinichi Saoshiro and Yoshiyuki Osada; Writing by Ritsuko Ando; Editing by Richard Pullin and Muralikumar Anantharaman

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Ominous Views of Japan's New Concrete Seawalls

Following the 2011 tsunami the Japanese government began building seawalls like this one in Ofunato Bay, Iwate prefecture.

The walls, including this one in Ofunato Bay, Iwate prefecture, are up to 41 feet high and intended to hold back a tidal surge.

Walls such as this, in Ofunato Bay, Iwate prefecture, are controversial because of their ecological impact.

This wall along Ofunato Bay, in Iwate prefecture, has narrow windows allowing residents to see the ocean.

The tourism industry in Japan"s northeastern coast has been hurt by the seawalls.

The Japanese government has spent around $ 12 billion to build walls like this one on Ryori Bay, Iwate prefecture.

The construction of seawalls like this one on Kesennuma Bay, Miyagi prefecture, have been a boon to the giant Japanese construction companies awarded government contracts.

Local residents complain that walls such as this, on Hirota Bay, Miyagi prefecture, impede their views of the ocean and cause environmental damage.

Hundreds of miles of walls have been built, including this stretch on Toni Bay, Iwate prefecture.

Fishermen complain that walls like this one on Hirota Bay, Iwate prefecture, prevent nutrient-rich runoff from the mountains from reaching the sea.

Because coastal villages have been relocated to higher ground, much of the land behind the seawalls is uninhabited.

Photographer Tadashi Ono believes walls like this one on Miyako Bay, Iwate prefecture, are a rejection of Japanese history and culture.

Some Japanese residents believe walls like this one on Miyako Bay, Iwate prefecture, are actually counterproductive because they provide a false sense of security.

Ono believes that building walls goes against the Japanese tradition of cooperating with the sea.

Throughout its history, Japan has been enriched and protected by the ocean, but now it"s building walls—like this one on Taro Bay, Iwate prefecture—to keep the ocean out.

Ono believes the walls, like this one in Raga Bay, Iwate prefecture, are being "constructed just to be constructed."

Only time will tell if walls like this one in Raga Bay, Iwate prefecture, will protect the Japanese coast from future tsunamis.

Tech

Rakuten eying entry into Japan's mobile carrier market: source

TOKYO (Reuters) - Japanese online retailer Rakuten Inc plans to join a government auction for wireless spectrum to be held in January, potentially becoming the country’s fourth major wireless carrier, a source briefed on the matter said on Thursday.

A woman pushing a pram walks in front of a Rakuten Cafe store at a shopping district in Tokyo August 4, 2014. REUTERS/Yuya Shino

The source declined to be identified because the talks are private.

Japan’s mobile carrier market is currently dominated by NTT Docomo Inc, KDDI Corp and SoftBank Group.

The Nikkei business daily, which reported on the plan on Thursday, said Rakuten would raise 600 billion yen ($ 5.3 billion) by 2025 to invest in base stations and other infrastructure.

Rakuten said in a statement that while it was true it is weighing entry into the mobile carrier market, media reports on the matter were not something announced by the company.

Rakuten shares were down 1.7 percent in early trade. The benchmark Nikkei average was flat.

($ 1 = 112.6300 yen)

Reporting by Yoshiyasu Shida and Thomas Wilson; Writing by Makiko Yamazaki; Editing by Stephen Coates

Our Standards:The Thomson Reuters Trust Principles.

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