After Toshiba Corp said that it may sell more of its prized flash-memory chip business than planned to urgently raise funds and would book a $6.3 billion hit to its U.S. nuclear unit, shares in the conglomerate tumbled sharply.
In a decision that has investors questioning whether the company has a long-term future without the unit, Toshiba said it would consider selling most, even all, of its stake in the chips business as the company is scrambling for capital.
“Usually in a corporate turnaround plan, the company would keep its most competitive business after selling non-performing businesses,” said Masayuki Kubota, chief strategist at Rakuten Securities.
“This turnaround plan gives no hope for Toshiba’s future,” he said.
To seek their understanding and support, Toshiba will be meeting creditor banks.
Sources have said that Toshiba’s loans from banks and insurers stood at about 800 billion yen ($7 billion) as of end of September. It biggest creditors are Sumitomo Mitsui Banking Corp and Mizuho Bank.
Creditors will need more convincing before they back Toshiba further even though the two lenders and state-backed Development Bank of Japan Inc have so far expressed support for Toshiba, said a source.
“Toshiba needs to come up with a convincing turnaround plan but it’s not an easy task,” said an executive at one of the creditor banks. “And we need to make sure there are no more negative surprises,” he said.
Compared with a 1 percent gain for the broader market, Toshiba shares slid 11.4 percent.
Nikkei reported that a probe into whether there was potential inappropriate conduct during its 2015 acquisition of Westinghouse has been launched by the company.
After Toshiba announced that the quarterly report has “not yet become available”, the developments came to light as the company was due to release its third quarter earnings on Feb. 14. It received approval to submit the report by March 14, the company has subsequently said.
“The era of the great industrial conglomerates is basically over. Do I think that Toshiba is going to survive? Personally I’m prepared to bet that they will but I think that in one or two years’ time, it’s going to be a completely different company,” Jesper Koll, CEO of WisdomTree Japan KK, said.
From its previous “buy” rating, Toshiba’s rating was suspended by Nomura. losses related to Toshiba’s nuclear business could be more than the preliminary figures provided by the company, noted analyst Masaya Yamasaki in a note.
“These losses have not been confirmed and could be become bigger,” Yamasaki wrote.
(Adapted from Reuters CNBC)