Rakuten Inc, a Japanese e-commerce company, experienced a significant surge in its shares, jumping as much as 24% on Monday. This increase in share prices came after Rakuten announced its plans to raise $2.2 billion through a stake sale to companies such as Japan Post and Tencent. The goal of this funding is to strengthen Rakuten’s competitiveness against industry giant Amazon.

Currently, Rakuten’s shares are trading at 1,471 yen, up 18%, resulting in a market capitalization of 2.1 trillion yen ($19.4 billion). This marks the largest rise in Rakuten’s shares in 17 years. Through the stake sale, Rakuten will have the necessary funding to invest in its logistics and mobile services, where it faces fierce competition from rivals like Amazon and SoftBank.

The involvement of Japan Post as an investor is seen as a significant advantage for Rakuten. With over 24,000 post offices across the country, Japan Post’s expertise in logistics services could greatly benefit Rakuten. Jefferies analyst Hiroko Sato has noted that Rakuten could receive significant help from the logistics services expert.

On the other hand, Rakuten’s mobile business has been struggling, impacting its valuations and earnings. However, analysts believe that costs for the mobile business will peak in the short term.

Investors are also excited about potential partnerships with Tencent, the world’s largest gaming company, and Walmart, the world’s largest retailer. Both Tencent and Walmart are participating in Rakuten’s share sale and are actively competing against Amazon in their respective markets.

Rakuten is currently engaged in a challenging battle against Amazon in the e-commerce sector and Japan’s well-established telecommunications companies in the mobile network industry. Nonetheless, with its advanced digital technology and the potential partnerships it is forming, Rakuten stands as a formidable competitor. Japan Post Holdings Chief Executive Hiroya Masuda stated, “Rakuten is the best partner for us, as it has advanced digital technology.”

With this deal, Japan Post Holdings becomes the largest shareholder in Rakuten, excluding the founding Mikitani family. The stake sale is part of a 242-billion-yen ($2.2 billion) funding initiative involving companies like Tencent and Walmart.

Rakuten’s CEO, Hiroshi Mikitani, expressed his optimism about the partnership, stating, “As tech giants grow in power, we’re combining our strength.” This deal follows the announcement in 2019 of the merger between chat app operator Line and SoftBank’s internet business Yahoo Japan.

Overall, the stake sale to Japan Post and Tencent, along with potential partnerships with Walmart and Tencent, positions Rakuten as a strong competitor in the e-commerce and mobile services sectors, challenging industry giant Amazon. With the new funding injection, Rakuten aims to enhance its logistics capabilities and strengthen its position in the Japanese mobile network market.

Useful links:
Rakuten Official Website
Amazon Official Website