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Mizuho Boosts Stake in Rakuten Securities Amid IPO Delay

Mizuho Financial Group plans a $597 million investment to increase its stake in Rakuten Securities to 50%. Rakuten's IPO is delayed due to zero-commission trades causing revenue concerns
Japan
m 8411.TSE r 4755.TSE Mid and Small Cap 2000 Blue Chip 150
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Japan’s Mizuho Financial Group is set to invest approximately 90 billion yen ($597 million) to raise its stake in online brokerage Rakuten Securities to nearly 50%. This capital infusion follows Mizuho’s acquisition of a roughly 20% stake in Rakuten Securities for about 80 billion yen last year.

Rakuten Group, the tech-focused parent company, aims to generate around 100 billion yen through Rakuten Securities’ listing. The funds are intended to be channeled into the group’s mobile business. However, the brokerage’s decision to introduce zero-commission trades for Japanese stocks in October has complicated the path to the initial public offering, originally targeted for year-end. Commissions constitute a substantial portion of Rakuten Securities’ revenue, and the move to zero-commissions was prompted by intensifying competition among online brokers amid heightened inflation concerns.

The announcement of Mizuho’s additional investment is expected on Thursday. This move is influenced by the stalled listing of Rakuten Securities Holdings, wholly owned by Rakuten Group, which submitted an IPO application to the Tokyo Stock Exchange in July. Initial plans had anticipated the listing to occur within the year. However, in August, Japan’s largest online brokerage, SBI Securities, decided to offer zero-commission trades for Japanese stocks, prompting Rakuten Securities to follow suit to retain competitiveness.

Market volatility resulting from increased interest rates also played a role in the decision to postpone the IPO this year. Rakuten Group has incurred consolidated net losses for four consecutive years until 2022 due to substantial capital investment in its mobile business. The group reported a first-half loss of 139.9 billion yen this year, putting it at risk of a fifth year in the red. Around 800 billion yen of corporate bonds are maturing from next year to 2025.

While Mizuho’s fresh capital injection is close to Rakuten’s IPO target, plans for the listing are still being considered. Mizuho Securities, a Mizuho subsidiary, purchased the stake in Rakuten Securities, and Rakuten Securities remains an equity-method affiliate. Mizuho is collaborating with Rakuten Securities to attract new customers, recently announcing a joint-venture company that will offer in-person financial advice early next year for customers using Rakuten Securities’ online trading platform.

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