Shares in the Japanese carmaker Nissan have tumbled in their biggest fall since August’s stock market sell-off, as investors turned their attention to the company’s planned tie-up with domestic rivals Honda and Mitsubishi.
Nissan’s shares fell by as much as 15% on Friday, before regaining some losses to close down 7.8%, in a sign of investor volatility.
The fall came less than two weeks after its shares soared by 20% on 17 December, after the first reports that Nissan was to begin talks on a potential merger with Honda.
Nissan, Honda and Mitsubishi are considering joining forces to better contend with falling sales and competition from Chinese brands.
Nissan and Honda have confirmed they have agreed to “start consideration towards a business integration through the establishment of a joint holding company”, and that Mitsubishi would also decide on joining by the end of January.
A merger between Nissan and Honda would combine Japan’s second- and third-largest carmakers, and add the smaller Mitsubishi, creating the world’s third-largest carmaker in terms of annual sales, behind Japanese rival Toyota and Germany’s Volkswagen.
Toyota is considered more resilient than its domestic competitors because of its early adoption of hybrid vehicles, while the likes of Nissan and Honda have struggled to find the money to invest in switching away from fossil-fuel models towards cleaner electric vehicles.
The slide in Nissan shares on Friday came amid wider gains on Japan’s main stock market, where the Nikkei closed 1.8% higher, taking the the index’s share average to a five-month closing high.
Despite the fall in Nissan’s share price, the planned merger with Honda is considered a driver of Japanese stock market optimism, with investors anticipating more corporate growth in the coming year.
Kentaro Hayashi, a senior strategist at the investment bank Daiwa Securities, said the merger talks “drove expectations that Japanese firms will continue to improve investor returns”.
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Honda shares closed 2% higher on Friday, and have risen by nearly 20% since the merger talks were first reported, while Nissan’s shares have climbed by 50% over the same period.
Analysts have said Nissan’s investors could be disappointed by the expected 5:1 share transfer ratio in any merger deal with Honda, according to data from Nikkei, and given the fact that Honda’s market value is about four times larger than that of Nissan.
Many of Nissan’s shareholders had been hoping for gains from the merger, after years of crisis and falling profits at the carmaker, as well as the turmoil that followed the arrest of its former chief executive Carlos Ghosn in 2018.
