Sept. 27 (Bloomberg) -- Shares of Sharp Corp., the world's largest liquid-crystal display television maker, fell on concern the company's first equity financing in 12 years may dilute earnings per share and expansion plans may miss peak demand.

The stock fell 1.2 percent to 2,020 yen at the 3 p.m. close in Tokyo, the lowest in two weeks. Osaka-based Sharp yesterday said it will sell 200 billion yen ($1.7 billion) of convertible bonds, its biggest ever, to invest in factories, including its Kameyama plant in central Japan.

``We expect large-panel LCD demand to weaken heavily in 2008,'' Fumio Osanai, an analyst at UBS AG in Tokyo who has a ``buy'' rating on Sharp, wrote in a report dated yesterday. The sale may dilute earnings per by as much as 7.3 percent, he said.

Sharp is trying to take advantage of the growing market for LCD TV sales by focusing on selling its larger, higher-definition Aquos screens overseas to protect its market share and profit margins. Global LCD TV shipment growth may halve to 52 percent next year and slow to 35 percent in 2008, according to estimates last week by Lehman Brothers Holdings Inc.

Investors can convert the bonds, which will mature in 2013, into common stock of Sharp after Nov. 1, provided the share price rises above a level to be set later, Sharp said yesterday. Nomura Holdings Inc. is arranging the sale, the largest in Japan in almost three years.

1994 Sale

The bonds will be sold at 102.5 yen per 100 yen face value. The coupon rate will be determined as early as Oct. 4, Sharp said. The convertible bonds can be converted into stock at a premium of between 22 and 25 percent above a share price to be set later, a Nomura banker involved in the sale said yesterday.

The last time Sharp raised money from the equity market was in 1994, when it sold 700 million Swiss francs ($560 million) of convertible bonds, the company said.

Sales of convertibles are often seen as a more attractive way for financing than selling shares because the company can delay the dilution of the existing stock. Selling convertible bonds is also cheaper than selling debt because companies can issue the bonds without paying coupons.

Sharp in April forecast 100 billion yen in net income, or 91.67 yen per share, for the year to March 2007.

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: September 27, 2006 04:28 EDT