Mizuho Set to Invest $600 Mln in Rakuten’s Securities Unit

Reuters

12:40 JST, November 9, 2023

TOKYO (Reuters) – Japan’s Mizuho Financial is set to purchase $600 million worth of shares in Rakuten Group’s securities unit, a person familiar with the matter said – a move that will help the e-commerce giant’s battered finances.

The move comes amid delays for Rakuten Securities’ planned initial public offering, a second person with knowledge of the matter said.

The investment will boost Mizuho’s stake in Rakuten Securities to nearly 50% from just under 20%, the people said, declining to be identified as the plans have not been publicly disclosed.

Rakuten Group, which is set to report earnings later in the day, said in a statement that it was in talks with Mizuho and this included discussions about an additional investment in Rakuten Securities but added that nothing had been decided.

A Mizuho spokesperson also said nothing has been decided.

Rakuten Group has suffered four years of losses, with its mobile network unit hemorrhaging cash and struggling to take market share from established players.

A quick sale of a stake in its securities unit appears to indicate that Rakuten “needs money fast,” said Amir Anvarzadeh, strategist at Asymmetric Advisors.

“It has 800 billion yen of bonds maturing next term. It really looks dire,” adding that Rakuten might also decide to list its credit card unit.

Rakuten in July applied to list its securities unit, aiming for it to go public by the end of this year.

But the IPO has been delayed to next year, one of the sources said, after the securities unit was forced to match its bigger rival SBI in offering clients stock trading with zero commissions.

Rakuten found during the IPO roadshow that it was unlikely to get its desired valuation for the unit, the source said.

Analysts have said the listing plan would now need to be revised drastically as trading commissions account for the bulk of the securities unit’s revenue.

Rakuten Group has some 1.79 trillion yen in debt outstanding, with 769 billion yen of that coming due in the next two years, LSEG data shows.

For Mizuho, the partnership will help it tap Rakuten Securities’ online brokerage expertise as well as its relatively young clientele at a time of stiff competition for traditional face-to-face brokerage services.

Shares in Mizuho were up 0.6% while Rakuten shares were down 1.5%.

>$1 = 150.91 yen