Nissan Stocks Decline Due to Unfavorable Terms of Honda Agreement
Nissan Motor shares fell again on Monday, experiencing a 13% loss over two days due to concerns that the proposed holding company agreement with Honda Motor Co. could result in a less favorable share ratio for Nissan investors. Nissan's stock saw a sharp decline of up to 6.7% on the Tokyo stock exchange. This drop came after a significant increase of over 60% since December 17, 2022, immediately before the announcement of the potential agreement.
However, on December 27, 2022, when attention shifted to the initially proposed share ratio for the Honda-Nissan partnership, the stock price experienced a steep decline. The wave of selling was further fueled by investors trying to take profits during the last trading session of the year. The troubled Japanese automaker announced on December 23, 2022, its intention to establish a joint holding company with Honda by August 2026 and take it public. While the exact details of the agreement are still being negotiated, the share exchange ratio will reflect the stock prices of both companies. A report by Nikkei on December 27 suggested a 5:1 share ratio in favor of Honda.
Kazuhiro Sasaki, head of research at Phillip Securities Japan, indicated that the selling pressure on Nissan shares might stem from investor disappointment regarding the expected share ratio, which is less favorable than some had hoped. He also added that Nissan's financial health remains a concern for investors. According to Steven Holden, founder of Copley Fund Research, despite the initial momentum from the Honda deal news, sentiment towards Nissan is quite negative. Holden noted that global fund positioning in Nissan is low, with very little positive movement in fund positions. He also described Nissan as one of the significant underperformers amid a global shift from traditional automakers to technology companies as the industry approaches 2025.
The broader Japanese stock market was also experiencing profit-taking on Monday, retracing after five consecutive days of gains the previous week. The benchmark Topix index fell by up to 0.8%, with the electronics and automotive sectors contributing to the decline. As of 3:24 PM Tokyo time, Nissan was the worst-performing stock in the blue-chip Nikkei 225 index.