Japan’s Mazda Motor Corp plans to shore up its finances by raising $2.1 billion and invest in a new plant in Mexico.
The company wants to raise 100 billion yen from a public share offering and 70 billion yen from subordinated loans from banks. If Mazda was able to raise 100 billion yen from a new issue, at the closing share price of 145 yen, only 690 million shares would be needed, which would represent 38.7% dilution of existing shares.
“I think share reaction of this size is to be expected for such a large surprising fund-raising,” said Kenichi Hirano, operating officer at Tachibana Securities.
Unfortunately the strong yen will bring the company’s fourth straight annual net loss in the financial year to March, for this month only the company expecting a 100 billion yen loss, much worse than an earlier estimate of a 19 billion yen loss. The Mazda2 subcompact and the Mazda3 compact car, build for 70% of the company’s vehicles in Japan and exported 90% of them in 2011.
“The company’s fundamental outlook is still very grim and at the same time there is a huge need for cash,” said Koji Endo, analyst at Advanced Research Japan.