Investing.com -- Nissan Motor Co. shares experienced a significant decline Friday, plunging as much as 15% before closing 7.8% lower.
The decline follows investor concerns over the terms of the company's proposed deal with Honda Motor Co (NYSE:HMC)., according to a report from Bloomberg.
The two automakers plan to establish a joint holding company by August 2026. While the exact terms of the merger are yet to be decided, it is said the share transfer ratio will consider the carmakers' stock prices.
Bloomberg noted that according to an estimate released by Nikkei, the starting ratio is potentially 5:1 share transfer ratio in Honda's favor. Citigroup (NYSE:C) is also said to have estimated the same.
The ratio reportedly tempered investor optimism about Nissan (OTC:NSANY)'s valuation in the merger.
This sharp drop contrasts with Nissan's stock rally since mid-December, driven by early excitement over the tie-up. Honda's shares rose over 2% Friday.
However, high volatility and elevated valuations have left the stock susceptible to selloffs. Bloomberg Intelligence's Tatsuo Yoshida warned that Nissan's recent rally is "temporary and short-lived," with integration terms likely reflecting "reasonable valuations."
Despite Friday's setback, Nissan shares still ended the week 15% higher, underscoring the volatile market response to the proposed Honda deal.
Bloomberg also noted that Citigroup said internal restructuring within Nissan is a key condition for the deal, with potential costs affecting the merger ratio, adding further uncertainty for investors.