Electronics conglomerate NEC Corp is considering raising about $2.1 billion, a source familiar with the matter said, joining a rush of Japanese companies tapping a resurgent equity market for funds.
Shares of NEC tumbled 9.5 percent to 286 yen as investors worried the capital raising would dilute the value of their holdings. The benchmark Nikkei average rose 0.5 percent.
If they are going to raise money purely for investments for growth, that's another story. But I'm afraid this could be aimed at restoring their weakened balance sheet, said Takeshi Osawa, a senior fund manager at Norinchukin Zenkyoren Asset Management.
Concerns like that are directing market attention to dilution in per-share value.
The global economic slowdown pushed NEC to a net loss of about $3 billion in the past financial year, driving its shareholders' equity ratio to just under 21 percent, roughly half that of rivals Sharp Corp and Panasonic Corp.
NEC is considering raising about 150 billion yen ($1.6 billion) in a public share offering and 50 billion yen in hybrid securities, according to the source, who was not authorized to speak publicly about the fund raising plans.
Hybrid securities, which have characteristics of both debt and equity, include subordinated debt and preferred securities. They typically have maturities of longer than 10 years or no maturity dates.
A 150 billion yen public offering at the current market price would boost its number of outstanding shares by a quarter.
The company said in a statement that no decisions have been made on any capital raising, responding to an earlier report in the Yomiuri newspaper that it may raise about 150 billion yen in funds. A company spokesman declined to elaborate.
NEC needs capital to help pay for the restructuring of chipmaking unit NEC Electronics, which is planning to merge with rival Renesas Technology Corp, as well as to fund growth areas such as lithium-ion batteries, the Yomiuri said.
NEC runs a joint venture with Nissan Motor Co Ltd to develop and manufacture lithium-ion batteries for hybrid and electric vehicles.
NEC would join a growing list of Japanese companies raising funds following a sharp rally in the stock market off a 26-year low in March.
Rival electronics conglomerate Toshiba Corp sold about $3 billion worth of stock in May, and Japanese companies in total issued $17.4 billion worth of new shares in the first half, a five-fold jump from a year earlier.
(Additional reporting by Junko Fujita, Kiyoshi Takenaka)
(Reporting by Kentaro Hamada; Writing by Nathan Layne; Editing by Edwina Gibbs and Joseph Radford)