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Rakuten Shares Jump 24% Post Stake Sale to Tencent, Walmart & Japan Post

UTC by Bhushan Akolkar · 3 min read
Rakuten Shares Jump 24% Post Stake Sale to Tencent, Walmart & Japan Post
Photo: Depositphotos

Rakuten is raising a massive $2.2 billion with its stake to some of the big companies. The company plans to use this capital to expand its delivery network and establish a strong footing in Japan’s rural areas.

On Monday, March 16, shares of Japanese tech giant Rakuten surged a massive 24% after the company announced a $2.2 billion fundraising. At the closing hours of the market, Rakuten Inc (TYO: 4755) shares were trading at 1,545 JPY.

Last Friday, Rakuten announced that it will be part of its stake to raise funds for expansion and compete with its US. rivals. Thus, Rakuten will sell 8.3% to local postal giant Japan Post. Similarly, Chinese telecom giant Tencent takes a 3.6% stake while US retail giant Walmart takes 0.9% stake. With this move, Japan Post will also be the biggest shareholder in Rakuten after the Mikitani family.

Rakuten handles more than 70 businesses from the mobile network, e-commerce, financial technology and others. Speaking to CNBC, Rakuten founder Hiroshi Mikitani said his company is “growing very fast — even at this size — and we need more capital for the growth.”

He further added that Rakuten and Japan Post will work closely on improving deliveries, especially in rural areas. Besides, the two companies will also leverage artificial intelligence and FinTech to accelerate growth and efficiency. On the other hand, Rakuten’s tie-up with Tencent is a major breakthrough for the company. Mikitani told CNBC that in the past they failed to strike a deal with search internet giant Baidu. Speaking to CNBC’s Squawk Box Asia, Mikitani said:

“I need to be very honest and China has been a very difficult market for us to penetrate. Now with a partnership with Tencent, we have a channel to export Japanese products to Chinese market, as well as export Japanese content … to the Chinese market as well”.

Rakuten on a Strong Footing that Boosts Its Shares

As said, the freshly raised capital will help Rakuten gain a strong footing against competing giants like Amazon.com Inc (NASDAQ: AMZN). The US e-commerce behemoth has been expanding its market share in Japan. The fresh capital will help the company build its strong delivery network thereby expanding in unchartered territories.

Japan Post’s last-mile access to every household will Rakuten penetrate the new market. In terms of revenue, Rakuten has been standing with very strong revenue. Rakuten’s revenue in 2020 stood at 1.46 trillion yen ($13.35 billion), a massive 15% surge in comparison to the previous year. In a note to investors, Citigroup analysts Koichi Niwa and Mitsunobu Tsuruo wrote:

“When we imagine how this alliance could develop, one possibility is the creation of a super-app connecting the real and online worlds. If the tie-up works well, we expect it to contribute materially to improved competitiveness at Rakuten.”

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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