In a recent development, Mizuho Financial Group Inc., Japan's third-largest banking group, has disclosed plans to boost its stake in Rakuten Securities Inc., an integral part of Hiroshi Mikitani's empire. The deal, reported by Nikkei and TheNewsMotion, is seen as a continuation of their business alliance and is expected to take Mizuho's stake close to 50%. The estimated cost of this deal is 90 billion yen ($596 million), which would enhance their stake from last year's 20 percent equity acquired for 80 billion yen, making Rakuten Securities an affiliate under the equity method.
This move comes as Mizuho aims to reinforce connections with the online brokerage and attract younger customers due to growing asset management interest ahead of the NISA tax exemption scheme expansion for small-lot investments in January. Both companies acknowledged these discussions in their stock exchange filings on Wednesday, November 08, 2023.
Today, the Rakuten Group will discuss Mizuho's additional investment in a board meeting. This comes at a time when Rakuten Securities has decided to postpone its Initial Public Offering (IPO) due to the introduction of zero commission on domestic stock trading. This new policy has put pressure on the IPO price. The initial aim was to generate about 100 billion yen from the securities unit listing.
Concurrently, Rakuten Group Inc., considering an IPO for Rakuten Securities Holdings Inc. on the Tokyo Stock Exchange to recover from a mobile phone business slump, may reassess its fundraising strategy due to Mizuho's additional investment. This follows Rakuten Securities' recent move to make online trading of domestic stocks free, similar to SBI Securities Co., amidst concerns over dwindling fee revenue. Both firms have acknowledged the potential extra investment and are deliberating over the timing of the possible listing.
InvestingPro Insights
Based on real-time data from InvestingPro, Mizuho Financial Group Inc. has a market capitalization of $40,091.22M USD. The company has been trading at a low P/E ratio of 9.41, implying strong near-term earnings growth. Mizuho has also shown a commendable financial performance with a revenue growth of 3.24% over the last twelve months as of Q1 2024, and a quarterly revenue growth of 12.12% in Q1 2024.
In line with the InvestingPro Tips, Mizuho has consistently raised its dividend for three consecutive years, demonstrating its commitment to shareholder returns. It's also noteworthy that the organization has maintained dividend payments for an impressive 20 consecutive years. This makes Mizuho a prominent player in the banking industry, underpinned by its strong free cash flow yield.
For potential investors, there are over 8000 additional tips available on InvestingPro, providing an invaluable resource for in-depth market analysis. These insights could be particularly useful in understanding the implications of Mizuho's recent strategic moves, such as its plan to increase its stake in Rakuten Securities Inc.
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