Kawasaki Heavy Industries (TYO: 7012) dropped more than 7% on Wednesday after Reuters reported the company is finalizing plans to raise around ¥200 billion ($1.23 billion) through new stock and convertible bonds.
Kawasaki Heavy Industries Ltd., KWHIF
The stock fell as low as 2,709 yen — its weakest level since February 3 — making it one of the worst performers on the Nikkei 225, which was up 0.6% on the same day.
Reuters cited two sources familiar with the matter, saying the fundraising details could be finalized as early as this week.
The stock and convertible bonds are expected to be sold primarily to overseas institutional investors, according to one of the sources.
Kawasaki responded with a cautious statement, saying it is “considering various capital strategies including issuing new shares and bonds,” but that “nothing has been decided.”
The drop came as investors reacted to the prospect of dilution from the new stock issuance.
Convertible bonds soften that concern to a degree — they convert into stock at a later date at a set price rather than diluting immediately.
That structure is catching on in Japan. Eight Japanese companies have raised nearly $7 billion through convertible bonds so far this year as of June 17, the highest total in over two decades, according to LSEG data.
Kawasaki plans to put the funds toward capital expenditure across several areas: aircraft engines, gas turbines, robots used in chip manufacturing equipment, and the hydrogen supply chain.
The company posted record sales and profit in the fiscal year ended March and is forecasting record business profit of ¥170 billion for the current year.
Those results have been driven partly by Japan’s push to strengthen strategic industries and defense spending.
Prime Minister Sanae Takaichi has set a target of more than ¥370 trillion in investment through fiscal 2040 across 17 sectors, including AI and chips.
Kawasaki CEO Yasuhiko Hashimoto has previously flagged that government agenda as a direct opportunity for the company.
Kawasaki has been building out partnerships on both the defense and technology fronts.
It is working with Nvidia to integrate AI and robotics, and last month announced a development hub in Silicon Valley.
Last week, Kawasaki signed an agreement with Airbus to cooperate on a possible Japanese variant of the Eurodrone defense drone.
The company manufactures aircraft, submarines, and missiles, positioning it as a key player as Japan expands its military budget in response to regional tensions.
The fundraising plan, if confirmed, would be one of the larger capital raises by a Japanese industrial company this year.
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