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Sharp Cancels New Share Sale, Citing Market Instability

Pavel Alpeyev
An employee uses a remote control as he inspects a Sharp Corp. Aquos liquid crystal display (LCD) television in the thermostatic aging room at the company's plant in Yaita, Tochigi Prefecture, Japan, on Thursday, Nov. 19, 2015. Shares rose as much as 7.1 percent in early Tokyo trading Nov. 20, rising for the second day, bringing the biggest two-day gain since July 3.

Sharp Corp., the electronics maker controlled by Foxconn Technology Group, canceled plans to raise as much as 200 billion yen ($1.8 billion) in a public share sale, blaming market instability fueled by U.S.-China trade tensions.

The Japanese company, which had planned to use the proceeds to purchase preferred stock and improve its finances, also retracted a full-year report related to the sale, it said in a statement Friday. The shares jumped as much as 15 percent in Tokyo.

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“The threat of dilution was one of the main reasons for the recent share price declines,” said Hideki Yasuda, an analyst at Ace Research Institute. “With that out of the way, it’s easier for investors to buy back in.”

Taiwan’s Foxconn took control of the company in 2016 and injected money for capital investments. The stock rose to a peak of about 5,000 yen last year before sliding with concerns over softening demand for smartphones and the liquid-crystal displays that Sharp makes for companies including Apple Inc. Of the 13 analysts tracking Sharp, 10 recommend selling the shares, according to data compiled by Bloomberg.

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“Due to U.S.-China trade friction, the stock market has become more volatile, so to continue with the new share issue would not be beneficial to our shareholders and stakeholders,” Sharp said in the statement.

Just hours earlier, Foxconn Chairman Terry Gou posed for pictures with U.S. President Donald Trump at a groundbreaking ceremony for the Taiwanese company’s new facilities in Wisconsin, an endorsement of controversial “America First” trade policies that have riled financial markets worldwide. Tariffs Trump has threatened in trade disputes with China and Europe are raising investor concerns about the economic outlook.

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Sharp had planned to spend 185 billion yen to buy back 200,000 preferred shares and retire the stock. The remainder of the proceeds were to be used on capital expenditures and research.

Updates with shares in second paragraph.

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