Selling the family silver (cont’d)

Rakuten Bank shares took a dive today, falling almost 9% to JPY 2,500, after Rakuten Group announced an overseas secondary offering of common stock of its banking subsidiary, raising further capital to address the company’s liquidity position that has been drained by investments into its struggling mobile business. The offering price is JPY 2,470, around the level of mid-November, compared to a JPY 2,000 notation after first quarter earnings, as well as a JPY 1,400 IPO price.

The secondary offering is sized so that Rakuten Bank will continue to be a consolidated subsidiary of the Rakuten Group even after the secondary offering. Before the secondary offering, Rakuten Group held 63.34% of Rakuten Bank; this will decline to 49.27%.

Rakuten Group expects to record proceeds from the secondary offering in its consolidated financial statements for the fourth quarter of the fiscal year ending December 31, 2023. Such proceeds will be 60,638,500,000 yen less the amount to be deducted as underwriting commission and any other expenses to be paid in relation to the offering.

The amount equivalent to the sale proceeds (after deducting expenses and taxes) in the secondary offering is expected to be recorded as the changes in a capital surplus and non-controlling interests in the consolidated statement of financial position. Rakuten Group will promptly announce the specific impact on their consolidated financial statements as soon as it becomes clear.

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