Jefferies shares drop as SMFG denies takeover plans

Jefferies Financial Group shares pared significant gains on Tuesday following reports that Japan's Sumitomo Mitsui Financial Group (SMFG) has no immediate plans to pursue a full takeover of the United States-based investment bank. The news, reported by Bloomberg, cooled investor enthusiasm that had initially driven the stock up by more than 10% earlier in the day. SMFG, which currently holds a 20% stake in Jefferies, is reportedly not engaged in acquisition talks due to various integration challenges. The Japanese lender, the second-largest in its country, has been a strategic partner since 2021 and recently increased its investment to strengthen its global securities reach. SMFG addressed the speculation in a formal statement. > Jefferies is our important partner. We decline to comment on hypothetical assumptions or rumors. The volatility in Jefferies' stock comes amid a difficult period for the firm. Shares have dropped approximately 36% so far this year and 21% in 2025, leaving the company with a market capitalization of about $8.2 billion. Investors have expressed concern over the bank’s exposure to the collapsed British lender Market Financial Solutions and losses associated with the bankruptcy of First Brands, a U.S. auto-parts supplier. Legal pressures are also mounting. Jefferies is facing a lawsuit from Western Alliance over $126.4 million in unpaid loans related to First Brands. Furthermore, a group of investors has alleged the bank committed fraud regarding a fund linked to the same supplier. Jefferies has denied these allegations and expects its losses from the Market Financial Solutions collapse to be limited to less than $20 million. The bank is set to release its earnings report after the market close on Wednesday. While analysts anticipate a surge in profit as mergers and acquisitions activity begins to rebound, the focus is expected to remain on management's strategy for addressing legal disputes and stabilizing the share price. In the competitive landscape of 2025, Jefferies held the seventh spot in global investment banking revenue rankings. In comparison, SMFG ranked third in its domestic market, trailing behind Nomura Holdings, Inc. and Mizuho Financial Group, Inc.. Analysts at JPMorgan Chase & Co. suggested that a takeover remains unlikely despite the recent stock price weakness. > We think SMFG is highly unlikely to move to make Jefferies a subsidiary simply because the latters stock has declined. The potential for a cross-border deal would also likely face intense regulatory scrutiny in the U.S. regarding foreign ownership of a major financial institution, alongside the cultural complexities inherent in such large-scale integrations.