Sharp Sees Share Price Surge by 22 Percent

on Dec 18, 2012

On Tuesday 18 December during the trading session on the Tokyo Stock Exchange Sharp’s stock price (TYO:6753) rose by the most in at least 38 years as concerns that the company will default on its debt eased.

At 10.40 JST shares in the Japanese electronics company rose to ¥367 or almost 22 percent higher than Monday’s closing price of ¥301. At 15.00 JST the stock had surrendered some of its earlier gains and was trading at ¥327 or 8.64 percent higher than yesterday. Sharp has been the worst performing major stock this year, declining by 52 percent – the biggest drop on Japan’s benchmark Nikkei 225 Stock Average, which has climbed 18 percent for the year-to-date.

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On 1 November Sharp warned investors there was doubt about its ability to survive after forecasting a record ¥450 billion (£3.3 billion) loss for the fiscal year as a result of ailing demand for its display panels. The forecasts were worse than the ¥376 billion (£2.76 billion) loss recorded for the previous fiscal year ended 31 March. In December however the Japanese company struck a much-needed agreement with Qualcomm for a ¥9.9 billion (£73 million) investment. Earlier this year Sharp failed to secure a planned ¥67 billion (£492 million) share sale to Taiwan’s Foxconn Technology Group after the Japanese panel maker signed loans from banks, discouraging the Taiwanese manufacturer from helping the unprofitable company.

“There was an investment from Qualcomm and a report on getting more banks for its lending plan,” said Hideki Yasuda, an analyst at Ace Securities Co. in Tokyo, as quoted by Bloomberg. “That’s clearing some of the concerns over Sharp’s ability to repay debt. It seems more attention is focused on possible earnings improvements than on bankruptcy risks.”

**Saving Sharp**
!m[Stock Soars on Renewed Investor Confidence in the Ability of the Display Maker to Repay Its Debt](/uploads/story/1047/thumbs/pic1_inline.png)
In November Fitch, one of the big three international credit rating agencies, slashed Sharp’s rating to junk due to lack of evidence to indicate any meaningful turnaround in the panel maker’s core operations would be achievable in the short to medium term. The Japanese company has ¥395 billion (£2.9 billion) of outstanding debt, including ¥200 billion (£1.46 billion) of convertible bonds due September. According to Bloomberg the bonds were priced at ¥77.15 per ¥100 face value as of 11.16 JST, the highest level since August 30th.

Bloomberg also quoted three bank officials who said that Resona Holdings will join a group of Japanese lenders, which will offer ¥360 billion (£2.64 billion) of rescue funds to Sharp. The display maker has pledged to shed more than 10,000 jobs and has secured ¥180 billion (£1.32 billion) in collateralized loans through Bank of Tokyo-Mitsubishi and Mizuho Corporate Bank.
**Deal With Applied Laser Technologies**
Yesterday Sharp Imaging and Information Company of America, one of Sharp’s units, posted a press release announcing a deal with Applied Laser Technologies which is meant to enrich Sharp’s portfolio of copiers and multifunction printers (MFPs). “We are pleased to welcome Applied Laser Technologies to our growing network of authorized dealers,” said Rich Boomsma, Senior Vice President of Sharp’s unit.


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