Sharp shares plummet over new capital plan

sharp2Japan’s Sharp has seen a third of the value of its shares fall after telling the world it was considering a capital reduction and preferred share issuance.

Investors apparently did not realise how much trash the company was scraping from the gutter of despair after years of losses.

A person familiar with the matter said the electronics manufacturer is planning to slash its capital from more than $1 billion to just $830,000 as part of a drastic restructuring plan. Sharp has been hit hard by mounting competition from cheaper Asia rivals in core its core liquid crystal panel display business.

Sharp’s shares slumped to the point where the company had a total market value of $2.77 billion and would have gone further but for stock market rules that prevent such slides.

Sharp has been indicating that a move would precede a preferred share issuance to its main lenders.

Japanese media have suggested the capital reduction is aimed at easing its tax burden as the smaller capital base will allow Sharp to be classified as a small to medium-sized enterprise for tax purposes.

This morning Sharp said that nothing had been decided and it would probably confirm any cunning plan on Thursday.

That plan will include a $1.7 billion debt-for-equity swap from its main lenders including a return for a promise to cut 5,000 jobs and split off its ailing smartphone display unit.