Sharp shares slide as credit rating is slashed

Published:  4 Sep at 10 AM

Japanese electronics manufacturer Sharp has seen its share value plunge further after the company reportedly agreed to reduce a stake sale price to Hon Hai Precision Industry of Taiwan. An eight per cent drop in share value on Monday followed a 13 per cent reduction on Friday following a decision by Standard and Poor’s to cut the firm’s credit rating to junk.

The deal with Hon Hai was originally for the company to buy a 9.9 per cent stake in Sharp at a share price of 550 yen each. However, if the sale does go ahead the deal will now be based on the average price of Sharp’s shares which ended on the Tokyo Stock Exchange at 182 yen each.

A junk rating for a company usually means investors backing away and shareholders dumping stock. S&P’s said it is considering reducing Sharp’s credit rating even further. Stock holders are concerned that the proposed deal with Hon Hai may not actually go ahead.

Hon Hai’s chairman, Terry Gou, has been in Japan recently, but is said to have left the country without a deal being finalised between the two companies. News agency Reuters has reported that Takashi Okuda, Sharp’s president, is now planning to fly to Taiwan in order to sign the deal.

According to Miyuki Nakayama, a spokeswoman for Sharp, although no details can be disclosed at the present time it was hoped that negotiations would be settled in the near future. Hon Hai is said to be offering a cash injection of around £500 million for a stake in Sharp.