Investing.com — Nissan Motor Co. Stocks experienced a significant decline on Friday, falling as much as 15% before closing down 7.8%.
The decline followed investor concerns about the terms of the proposed deal with the company Honda Motor Co (NYSE: )., according to a Bloomberg report.
The two automakers plan to establish a joint holding company by August 2026. While the exact terms of the merger have yet to be decided, the share transfer ratio is said to take into account the automaker’s stock prices.
Bloomberg noted that according to the estimate it published, the initial ratio is potentially a 5:1 stock transfer ratio in Honda’s favor. Citigroup (NYSE: ) also said it estimated the same.
The ratio reportedly tempered investor optimism about the valuation of Nissan (OTC: ) in the merger.
The sharp decline contrasts with a rally in Nissan shares since mid-December, fueled by early excitement over the merger. Honda shares rose more than 2% on Friday.
However, high volatility and elevated valuations have left the stock susceptible to sell-offs. Bloomberg Intelligence’s Tatsuo Yoshida cautioned that Nissan’s recent surge is “temporary and short-lived” and the terms of the integration likely reflect “reasonable estimates.”
Despite Friday’s setback, Nissan shares still ended the week up 15%, underscoring the volatile market reaction to the proposed deal with Honda.
Bloomberg also noted that Citigroup said internal restructuring within Nissan was a key condition for the deal, with potential costs affecting the merger ratio, adding further uncertainty for investors.
