Sony share price tumbles amid $3.6-billion stock, bond offering

Japans Sony Corp announced on Tuesday plans to raise ¥440 billion ($3.6 billion) via a convertible bond offering and its first public stock issuance in 26 years to bolster capacity in promising growth areas.

The electronics company said it expects to raise ¥322 billion through the share offering, capitalizing on the over 100% year-on-year rally of its stock. The proceeds from the sale, worth nearly 10% of the companys value, will be used to bolster capacity to meet growing demand for its image sensors, which, having attained the top spot in the industry, are used by leading smartphone makers such as Apple, Samsung and Xiaomi.

The company said it plans to spend ¥210 billion this year to boost production of image sensors, a key high-tech part in digital cameras and smartphones, and ¥80 billion on camera modules. A Sony executive had recently said that demand for sensors was now so strong that it was struggling to keep up. Sales of image sensors are expected to jump 22% in the current fiscal year, the company predicts.

“The purpose of this fund raising is to secure funds to invest in growth and to strengthen Sony Corporations financial base,” Sony said in a statement. “In addition to securing funds for active and concentrated investment in businesses that are driving growth, Sony Corporation, by increasing shareholders equity, aims to secure its ability to make future further investment.”

Although the companys decision to raise public money after the recent tough years sounded a positive note for its turnaround strategy, shares slid more than 8% in Tokyo as short-term investors questioned the strength of Sonys balance sheet and feared the issuance will dilute existing shareholders by nearly 10%.

Long-term investors, however, saw the decision to invest heavily in a promising segment as a step in the right direction. The Japanese electronics maker is also pouring money in one of its other main cash cows – its gaming business that has enjoyed strong sales of the PlayStation 4 console, as well as related content.

Naoki Fujiwara, fund manager at Shinkin Asset Management, said, cited by the Financial Times: “This looks like the first step towards shifting from being on the defensive to offensive. The fact that it can turn to the equity market to raise money is a signal of how far its turnround has come.”

The company anticipates to return to growth in the current financial year ended March 2016 for the first time in three years, having said back in April that its restructuring is largely complete and that it would resort to aggressive investment to spur growth.

Sony Corp slid 8.26% on Tuesday in Tokyo to settle at ¥3 461.5 per share, marking a one-year jump of 105.80%. The company is valued at ¥4.41 trillion. According to the Financial Times, the 16 analysts offering 12-month price targets for Sony Corp have a median target of ¥4 360, with a high estimate of ¥5 800 and a low estimate of ¥1 750. The median estimate represents a 15.56% increase from the previous close of ¥3 773.