Japan's Sharp said it was considering a capital reduction and preferred share issuance, wiping nearly a third off its market value at one stage on Monday as investors reeled from the severity of its distress after years of losses.
A person familiar with the matter said the electronics manufacturer is planning to slash its capital from more than 120 billion yen ($1 billion) to just 100 million yen as part of a drastic restructuring plan. Sharp has been hit hard by mounting competition from cheaper Asia rivals in core its core liquid crystal panel display business.
By 0325 GMT, Sharp's shares were down 24 percent, giving the company a total market value of $2.77 billion. At one point they had tumbled as much as 31 percent, their daily limit.
The source, speaking at the weekend and declining to be identified as the information was not publicly announced, said the move would precede a preferred share issuance to its main lenders.
Japanese media have suggested the capital reduction is aimed at easing its tax burden as the smaller capital base will allow Sharp to be classified as a small to medium-sized enterprise for tax purposes.
Sharp declined to provide further details on Monday, saying that it would make a final decision by Thursday, when it announces a new business plan.
That plan will include a $1.7 billion debt-for-equity swap from its main lenders including a return for a promise to cut 5,000 jobs and split off its ailing smartphone display unit, a separate source told Reuters last month.