TOKYO (Reuters) - Shares in Japanese electronics maker Sharp Corp fell as much as 16.5 percent on Friday after the company said it would be demoted to the Tokyo Stock Exchange's second section from the first section as of August 1.

According to the Tokyo bourse's rules, first-section companies are transferred to the less prestigious second section after their net worth turns negative.

Sharp, after struggling with slumping display prices and slower sales of client Apple Inc's iPhones, agreed to sell a $3.5 billion stake to Taiwan's Foxconn in April. Its operating loss ballooned to 162 billion yen ($1.55 billion) in the financial year ended March from the previous year's 48.1 billion yen.

(Reporting by Ritsuko Ando; Editing by Muralikumar Anantharaman)