TOKYO: Sharp lost a quarter of its market value on Monday following reports that the struggling Japanese electronics giant is planning a drastic capital reduction to help wipe away losses.
The firm plunged as much as 31 percent in Tokyo before recovering some ground to trade at 195 yen ($1.63), down 24.4 percent, by the break.
Weekend reports by the leading Nikkei business daily and other Japanese media said Sharp plans to reduce its capital by 99 percent to just 100 million yen, the upper limit for the category of small and mid-sized companies with tax advantages.
The Osaka-based company -- a major supplier to Apple that is a leader in screens for smartphones and tablets -- also plans to use surplus money squeezed out of the capital reduction to wipe away years of accumulated losses, the reports said.
The move, unusual for a firm that has not gone bankrupt, comes as it struggles to move past years of gaping losses, partly due to bleeding in its television unit, which has been hammered by competition from lower-cost rivals.
Responding to the media reports, Sharp on Monday said a capital reduction remains an option as part of its wider restructuring.
"As for our capital policy, we have been making various considerations including issuance of preferred shares and a capital reduction but there has been no decision made," the company said in a statement.
Sharp is to announce a mid-term business plan on Thursday along with its fiscal-year results.
Reports said Sharp was also expected to get financial assistance from its bank lenders, such as swapping debt for preferred shares with no voting rights.
"Investors may be afraid that preferred shares, if converted into common shares, would dilute stakeholders' rights," said Toshihiko Matsuno, senior strategist at SMBC Friend Securities.
Matsuno added that Sharp has yet to announce a clear plan.
"While there are so many uncertain factors, the stock has become a target of money game," he said, referring to speculative trading.
For the reported capital cut, Sharp would need to get approval at a general shareholders' meeting in June.
Earlier this year, the Nikkei said Sharp is considering closing four domestic factories that produce electronic components, as well as withdrawing from its solar cell business.
As the company writes off production equipment in unprofitable businesses, its net loss for the year ending in March was likely to exceed 100 billion yen, up from the company's own loss forecast of 30 billion yen, the business daily said.
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