Toshiba writedown warning revives financial stability fears

Shares fall 20% as investors price in risk of equity wipeout over US nuclear business

The stock plunge followed Toshiba’s warning the previous evening that it could book “several billion dollars” of impairment losses on part of its Westinghouse nuclear business in the US

The stock plunge followed Toshiba’s warning the previous evening that it could book “several billion dollars” of impairment losses on part of its Westinghouse nuclear business in the US

 

Investors wiped a fifth off of Toshiba’s market value on Wednesday as they scrambled to reassess the company’s financial stability after its multibillion-dollar writedown warning, and analysts warned there was “no end in sight” to a runaway cost crisis.

Fund managers in Tokyo and Hong Kong said the nuclear-to-electronics conglomerate – once among the proudest names in corporate Japan – was fighting for survival with its slack corporate governance and repeated disclosure failures having “probably permanently” lost it the trust of investors.

As the shares sank 20 per cent under a glut of sell orders, and Japanese agency R & I downgraded Toshiba’s credit rating from BBB minus to BB, Tokyo traders said the market was trying to price in the possibility that Toshiba’s shareholder equity would be zero by the end of the current fiscal year in March. Efforts to shore that up, say bankers, could involve a debt-for-equity swap, asset sales, large bank loans or other emergency measures.

The stock plunge followed Toshiba’s warning the previous evening that it could book “several billion dollars” of impairment losses on part of its Westinghouse nuclear business in the US – a key engine of Toshiba’s efforts to revive its fortunes after a $1.3billion accounting scandal last year.

Copyright The Financial Times Limited 2016