Sony upsets shareholders with image sensor plan

Sony has decided to issue new shares. This is the first time since 1989 as part of a $3.6 billion capital raising plan to fund their imagine sensor business. Their image sensors are used in all major phones including Apple’s iPhone and Samsung Galaxy devices. They said they would raise ¥322 billion ($2.63 billion) by offering new shares and ¥120 billion by selling convertible bonds.

Shareholders were not impressed by the plan and showed so by selling their shares. Sony’s stock closed 8.25% lower that day.

Back in April Sony said it had virtually completed a restructuring and that there were strong sales of digital sensors. It’s projecting a operating profit would more than quadruple to ¥320 billion during the fiscal year ending March 2016.

Sony is miles ahead of the competition when it comes to image sensors. It’s big problem is capacity constraints in trying to reach large demand, especially in China, with all the new affordable headsets that are expected to continue to grow.

Kenichiro Yoshida, Sony Chief Financial Officer said in April that they plan on investing ¥210 billion in image sensors during the current fiscal year and ¥80 billion on camera modules.

Tatsunori Kawai, chief strategist at kabu.com Securities, said

 “The dilution threat is enough to cause short-selling today, but assuming the company uses the funds raised for pro-active purposes—and successfully—it could lead to share gains later,”

Yasuaki Kogure, chief investment officer at SBI Asset Management, said

“Raising cash to beef up the growing units is understandable, but it should do it via a bond offering or bank lending because Sony’s return on equity as a whole is still very low,” he said. “This reminds me of old-and-bad Japan—when companies issued new stock simply because prices were high, without considering damage to existing shareholders.”

Sony’s response was they aim at strengthening the company’s financial base so it can act promptly on necessary investments. That the bond offering will help bring in long term cash at a low cost.

In the past few months Sony has cut all the low profit pieces and is investing in it’s best earners being video games, movies, devices and music. However they haven’t ruled out exiting television or smart phones as it did with computers last year.

Source: WSJ

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