April 11, 2021

Rakuten shares jump after stake sale to Japan Post, Tencent, Walmart

The logo of Japanese tech giant Rakuten logo seen at the Mobile World Congress 2019.

Paco Freire| SOPA Images | LightRocket via Getty Images

Shares of Japanese tech giant Rakuten jumped 20% on Monday, extending their gains after the company’s announcement that it plans to raise $2.2 billion in order to better compete with its U.S. rivals.

Rakuten said on Friday it will sell an 8.3% stake to postal and banking giant Japan Post, which will be the biggest shareholder outside of the founding Mikitani family. Chinese internet company Tencent will take a 3.6% stake, while U.S. retailer Walmart will buy a 0.9% stake.   

Rakuten has over 70 businesses ranging from e-commerce, mobile network, video streaming and financial technology. It has a market capitalization of around 1.79 trillion Japanese yen ($16.4 billion).

Hiroshi Mikitani, Rakuten’s founder, chairman and chief executive, told CNBC on Monday that his company is “growing very fast — even at this size — and we need more capital for the growth.”

He explained that Rakuten and Japan Post are jointly developing capabilities in artificial intelligence to make deliveries — especially in rural areas — more efficient. The two companies could also collaborate on fintech, said Mikitani.

Breaking into China’s market

Meanwhile, the tie-up with Tencent marks another attempt by Rakuten to penetrate the Chinese market. Mikitani said his company had a failed partnership with Chinese internet giant Baidu in the past.

“I need to be very honest and China has been a very difficult market for us to penetrate,” he told CNBC’s “Squawk Box Asia.”

“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,” he added.

Rakuten’s revenue last year stood at 1.46 trillion yen ($13.35 billion) — an increase of 15.2% from a year ago. But it incurred an operating loss of 93.85 billion yen ($860.57 million) in 2020, reversing the operating profit of 72.75 billion yen a year ago.  

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