Shares of Daiwa Securities Group Inc., Japan's second-biggest securities company, plunged more than 12 percent Monday after the company announced plans to raise about 240 billion yen ($2.5 billion) in a public share offering.
The Tokyo-based brokerage said after market close Friday that it will 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 ($6.3 billion) of shares as early as this week, Bloomberg News said citing two unnamed sources.
Investors knew that Mizuho wanted to raise capital, but Monday's report on the possible timing of an offering renewed concerns. The issue lost 3.4 percent to 229 yen.
Mizuho declined to comment on the report.
Analysts called Daiwa's move disappointing and abrupt, especially because Daiwa until recently had indicated that it had sufficient capital.
Credit Suisse maintained its "outperform" rating on the stock but said it is now recommending bigger rival 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 in a note to clients.
The share offering comes as Daiwa faces increasing competition both at home and abroad. Last month Sumitomo Mitsui Financial Group Inc. said it will take over Citigroup's Japan securities business _ Japan's first acquisition of a leading brokerage by a bank.
Daiwa posted a net loss of 85 billion yen ($891.5 million) last fiscal year ended March 31.
The total offering, which also includes 58 million treasury shares, will expand the number of Daiwa shares outstanding by about 30 percent, the company said.