Investors Set To Raise Rakuten Securities’ Stake By $597 Million Investment Thursday

Investors Set To Raise Rakuten

OpenLife Nigeria has reliably gathered that Japan’s Mizuho Financial Group is concluding plans to increase its stake in online brokerage Rakuten Securities to nearly 50% with an expected investment of about 90 billion yen ($597 million).

The fresh injection of capital comes after the banking group bought a roughly 20% stake in Tokyo-based Rakuten Securities for about 80 billion yen last year.

Tech-focused parent Rakuten Group seeks to raise about 100 billion yen by listing the brokerage, with the funds to be invested in the group’s mobile business.

But Rakuten Securities’ decision to start offering zero-commission trades for Japanese stocks in October has complicated the roadshow for the initial public offering, which the group had aimed to complete by the end of the year.

The brokerage caters to retail investors, and commissions make up a big share of its revenue.

Competition among online brokers is heating up as the young investors that mostly use these platforms take a greater interest in how their money is managed amid high inflation.

The additional investment will be announced Thursday.

Factoring into the move is the stalled listing of Rakuten Securities Holdings, which is wholly owned by Rakuten Group. Rakuten Securities Holdings applied for an IPO on the Tokyo Stock Exchange in July.

Sources familiar with the IPO plans said at the time that the listing was expected to take place this year. Then in August, Japan’s biggest online brokerage, SBI Securities, decided to offer zero-commission Japanese stock trades.

Rakuten Securities soon followed suit, in a bid to prevent its largest rival from pulling further ahead. As of the end of March, SBI Securities had roughly 10 million brokerage accounts to Rakuten Securities’ 9 million.
Commissions on Japan stock trades account for almost a fifth of Rakuten Securities’ operating revenue.

As Rakuten was preparing to list the holding company, there was apparently a strong pushback from investors wanting time to see the earnings impact of slashing commissions to zero.

Market volatility stemming from higher interest rates was also a factor in a decision to hold off on the IPO this year.

Rakuten Group has posted consolidated net losses for four straight years through 2022 owing to heavy capital spending in its mobile business. For the first half of this year, the group reported a loss of 139.9 billion yen, posing the risk of a fifth year of red ink.

Roughly 800 billion yen of corporate bonds will come due from next year to 2025.

While the fresh capital from Mizuho is close to the amount that Rakuten seeks to raise through the IPO, plans for the listing appear to remain on the table.

Mizuho subsidiary Mizuho Securities bought the stake in Rakuten Securities and counts the company as an equity-method affiliate. The status is not expected to change after the additional investment.

Mizuho is partnering with Rakuten Securities to attract new customers.

Last month, Mizuho Securities and Rakuten Securities announced a joint-venture company that will start offering in-person financial advice early next year for customers who use Rakuten Securities’ online trading platform.

Investment from outside the finance industry has added to the competition. In October, wireless carrier NTT Docomo upgraded online broker Monex into a subsidiary.

This move comes ahead of the start of Japan’s new NISA tax-exempt individual saving account program next year.

Content, outside headline, Nikkei