Japan's All Nippon Airways (ANA) said Tuesday it would issue new shares worth over 200 billion yen ($2.5 billion) this month, in a move that sent its stock into a nosedive, tumbling 14 percent by the close.
The company, which said the sale's offering price will be set between July 18 and 20, added that much of the capital raised will be earmarked to buy Boeing 787s Dreamliners mainly for expanding its international routes.
ANA expects to receive 55 of the aircraft which have been lauded as the future of aviation for their use of lightweight, fuel-saving materials.
The carrier credited a pickup in global travel and cost cuts for its record operating profit of about $1.2 billion in the year ended March, with once-bankrupt rival Japan Airlines also booking a strong profit in the period.
But investors dumped ANA shares on reports of the sale Tuesday, with the stock plunging 14 percent to 193 yen in Tokyo, as they worried that the issue of about 914 million new shares would dilute the value of their investment.
The move, which ANA confirmed after markets closed, would boost ANA's outstanding shares by about 40 percent, and mark the biggest share sale in Japan this year for a non-financial company, the Nikkei business daily said.
"Through this offering of new shares... the company is seeking to promote investment in strategic aircraft that have high economic efficiency, chiefly the state of the art Boeing 787s," ANA said in a statement.
It said the public offering was intended to help it in "establishing a financial base that is able to respond in a timely and flexible manner to future growth opportunities, aiming to establish a multi-brand strategy based in Asia".
Earlier this year, ANA said it would aim to boost its international capacity by about 22 percent within two years and begin fresh routes as part of a new business strategy.
The carrier, the first to fly Boeing's new 787 Dreamliner late last year, said the plan for fiscal 2012 was meant to be a buffer against uncertainty in the global economy, high oil prices and a currency rate fluctuations.
In its operating results released in April, ANA also said group revenue rose to 1.41 trillion yen with a higher net profit of 28.18 billion yen.
It projected operating profit will rise 13.4 percent to 110 billion yen year-on-year in fiscal 2012 and net profit by 42.0 percent to 40 billion yen on a 6.3 percent rise in revenue to 1.5 trillion yen.
Japan's aviation market has long been dominated by ANA and Japan Airlines, but this year sees the launch of a number of new low-cost carriers that are expected to provide competition to the established airlines.
Flag-carrier Japan Airlines, which went bust in one of the nation's biggest-ever bankruptcies in 2010, applied last month to re-list its shares in Tokyo by mid-September, according to local media.
The airline continued operating while it underwent an overhaul that included huge job and route cuts.
"With Japan Airlines' re-listing, rumoured to be coming in the fall, ANA may be seeking to pre-empt JAL by raising cash now rather than risking it later," said CLSA equity strategist Nicholas Smith.
Jetstar Japan, a low-cost carrier part-owned by JAL and Australia's Qantas, made its maiden flight on Tuesday, traveling from Tokyo to Sapporo city on the northern island of Hokkaido.
-- Dow Jones Newswires contributed to this report --