Rakuten Group Inc., a Japanese e-commerce company, is reportedly in the final stages of talks to raise approximately ¥300 billion ($2.2 billion) through an offering of new shares. The move comes as the company seeks to shore up capital depleted by its struggling mobile unit, which is bleeding cash as it tries to gain market share from larger rivals in Japan's saturated mobile market. NTT Docomo Inc., KDDI Corp., and SoftBank Corp. together command over 95% of Japan's mobile market, making it difficult for Rakuten to attract customers as a low-cost carrier.
As a result, Rakuten has been considering various measures to improve its financial situation, including the sale of its stake in retailer Seiyu Holdings Co. to investment firm KKR & Co. for around ¥22 billion. However, the company has yet to secure spectrum allocation that is best-suited for connectivity inside buildings and is facing the high cost of building out 4G base stations to supply better connectivity.
The news of the proposed share offering has resulted in a sharp drop in Rakuten's stock price, with shares falling 9.1% on Monday in the company's biggest drop since March 2020. However, the details of the deal may change depending on share price moves, according to unidentified people familiar with the matter cited by Reuters.
In conclusion, Rakuten's struggles in the mobile market have prompted the company to seek additional funding through a share offering, which could help it to better compete with its larger rivals. However, the success of this strategy remains uncertain, and the company must continue to navigate a challenging market while trying to improve its financial situation.
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