Mizuho Financial Group Inc.'s additional investment in the online securities arm of Rakuten Group Inc. could help ease funding pressure at the broker after its aborted IPO, but the duo probably need to move faster to make real gains from their alliance.
Mizuho will spend ￥87 billion for an additional 29.01% equity stake in Rakuten Securities Co., taking the stake owned by the third-largest banking group in Japan to 49%, according to a joint statement on Rakuten Group's website. Rakuten Group will own 51%. The transaction, which is expected to close by Dec. 15, follows the acquisition of about 20% by Mizuho for ￥80 billion in November 2022. Analysts at the time said that the deal was expensive for Mizuho.
The two companies expect the additional investment to help strengthen their alliance to build "a new retail business model that combines both online and offline businesses in the fields of asset formation and asset management," according to the joint Nov. 9 statement.
"Mizuho is probably [heading] in the right direction," said Toyoki Sameshima, a senior analyst at SBI Securities. "But the question is whether Mizuho can work with Rakuten quickly to get into the market fast, as competition is heating up."
Rakuten Securities trails behind SBI Securities, the biggest online brokerage in Japan, in the number of online accounts. Rakuten Securities started offering zero-commission trades for Japanese stocks in October, after SBI Securities launched a similar product in August. The offering of zero-commission products for online trading in stocks is a move by companies to attract young investors.
"Rakuten has been struggling to increase its accounts these days," SBI's Sameshima said.
Japan's benchmark Nikkei 225 index has gained more than 25% so far this year, attracting new investors. Japan also plans to introduce a revised Nippon Individual Savings Account (NISA) that will offer tax-exemptions to individual investors as the government seeks to tap more than ￥1,000 trillion of cash and deposits.
"I don’t think Mizuho will get significant benefit from its deeper alliance with Rakuten," Shinichi Tamura, a senior analyst at Okasan Securities Co. "Mizuho itself has already been pursuing an online brokerage business," Tamura noted.
Rakuten Group sought to launch an IPO of Rakuten Securities earlier this year as the the technology conglomerate tried to raise funds for its cash-intensive mobile telephony business. However, Rakuten said in the Nov. 9 press release that the IPO application has been "temporarily" withdrawn and the company will seek to list Rakuten Securities "at the appropriate time."
As of Nov. 8, US$1 was equivalent to ¥150.78.