Rakuten to raise $2.5bn

Rakuten Group Inc, the Japanese e-commerce and fintech company, announced its plan on Tuesday to raise up to 332 billion yen ($2.46 billion) through the issuance of new shares on the market. The funds will also be allocated to founder and CEO Hiroshi Mikitani.

Ahead of the announcement, Rakuten’s shares experienced a 5.1% decline, extending the previous day’s sharp slide, following reports of the plan. The move is aimed at bolstering the company’s finances, which have been impacted by losses from its mobile business over the years.

In a statement, Rakuten outlined its objective to raise approximately 290 billion yen through a public offering, with an additional 41.8 billion yen allocated to Mikitani, his asset management firm, CyberAgent Inc, and Tokyu Corp.

The news of potential share dilution contributed to the largest one-day drop in Rakuten’s stock in three years. Since the Reuters report, the company’s market capitalisation has declined by approximately $1.6 billion. Analyst Travis Lundy of Quiddity Advisors noted that large sales of new equity tend to be dilutive but also prompt decisions regarding whether to hold shares, which could lead to some investors selling their holdings.

Rakuten stated that the raised funds would be utilized for debt repayment and the establishment of base stations. The company recently reported a quarterly loss and announced the sale of its stake in supermarket chain Seiyu to U.S. private equity firm KKR & Co Inc for 22 billion yen. Furthermore, Rakuten conducted an initial public offering for its banking unit last month and has plans to list its brokerage arm.