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The "Amazon" of Japan, Rakuten, Selling $2.2 Billion in New Stock

By Nicholas Rossolillo - Mar 12, 2021 at 8:41PM

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Amazon is taking over its home turf, so it's raising cash to fight back.

Japanese e-commerce giant Rakuten (RKUNY 0.00%) is selling $2.2 billion-worth of new stock to aid it in its fight against Amazon (AMZN 3.66%). Rakuten announced it was selling shares primarily to postal and logistics company Japan Post, as well as Chinese technologist-turned-investor Tencent Holdings (TCEHY -0.39%) and Walmart (WMT 1.97%). In addition to taking about an 8.3% stake in Rakuten via the new share issuance, Japan Post is partnering with Rakuten on things like new logistics centers, delivery and pick-up systems, and digital payments.

Losing its top spot to you-know-who

Like Amazon, Rakuten was founded during the late 1990s when the internet began to be commercialized. For many years, it held the top spot in Japan as the largest online retailer and has since expanded overseas. The company reports having over 1.4 billion members worldwide. 

A mini grocery cart with face mask and shipping boxes sitting on top of a laptop.

Image source: Getty Images.

However, Rakuten has struggled to gain traction in the lucrative U.S. retail market. Amazon, of course, owns the lion's share of e-commerce. But while Rakuten has spun its wheels here in the states, Amazon has actually picked up quite the head of steam on Rakuten's home turf. It's Amazon that's now Japan's largest e-commerce site. Rakuten managed to grow its internet business last year during the pandemic, but not by much.

Perhaps the $2.2 billion cash infusion it will receive will remedy the situation. Rakuten and Japan Post will double down on shipping services and will try to help traditional retailers adapt to new expectations consumers have in a post-pandemic world. Having the mighty Tencent as an ally could help its cause, too. Tencent operates mainland China's largest social media network WeChat, a super app that combines shopping, payments, entertainment, and a myriad of other services in one place. Walmart also has a vested interest in Rakuten succeeding. While Walmart currently holds the top overall retail spot in the U.S. in terms of revenue, Amazon is closing in fast as online shopping grows increasingly important every year.

Only time will tell if the fresh liquidity will help, though. In a year in which online selling boomed because of COVID-19, Rakuten grew its "internet services" segment revenue by only a single-digit percentage compared to 2019.  

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Stocks Mentioned, Inc. Stock Quote, Inc.
$2,302.93 (3.66%) $81.38
Rakuten, Inc. Stock Quote
Rakuten, Inc.
$5.64 (0.00%) $0.00
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$128.48 (1.97%) $2.48
Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
$43.86 (-0.39%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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