Toshiba to Issue Shares Worth $5.4bn to Prevent TSE Delisting


Recently, Toshiba Corp has announced that it is going to raise shares to the tune of $5.4 billion as it wants to build funds urgently and prevent the company from getting unlisted. Past week, Toshiba has obtained the necessary approval to proceed its plan for issuing new shares to foreign investors to amend for its financial weakness.

Toshiba has billions of dollars in liabilities due to the bankruptcy of its US nuclear reactor maker Westinghouse. The company is looking forward to raising a minimum of $6.7 billion by March next year from getting delisted from TSE (Tokyo Stock Exchange). According to the rules and regulations of the stock exchange, any company having negative net worth for two years in a row will be eligible to get delisted.

The chip unit sale (Toshiba Memory Corp sold to Bain Capital) is likely to generate revenues to the tune of $18 billion for Toshiba. However, the deal has been significantly delayed even after months of talking and negotiations which has undoubtedly added a lot of pressure for the company to meet its deadline in March 2018.

Toshiba along with its United States partner Western Digital Corp have not settled their dispute regarding the sale of chip unit that was signed in September. According to Western Digital Corp, the deal will increase the risks of technology leaks and is not appropriate for the regulatory reviews. The partner company has also filed arbitration to prevent Toshiba for investing in a new chip facility at Yokkaichi in Japan.

Sky News

With all these deals hanging in doubts, Toshiba has announced to offset its value and create positive net worth by issuing shares which is equivalent to 35% of the company. More than 30 foreign investors will take a piece of 5.4 billion dollar share, and they include Cerberus Capital Management, Third Point LLC and Oasis Management Company.

The sale of shares for Toshiba is overseen by Goldman Sachs that has structured the deal specifically for overseas companies. The companies based in Japan are not allowed to invest because Toshiba came under the scrutiny of Tokyo Stock Exchange after the accounting scandal that took place in 2015. In the year 2015, the company allegedly stated its profits by approximately $2 billion in due course of 7 years.

In spite of the bankruptcy, scandal and sale of semiconductor unit of Toshiba, some companies are interested in buying 2.28 billion shares of Toshiba. The cost of one stock is 262.8 Yen which is available at 10% discount as on the closing price of November 2017. With the sale of shares, 54% of the earnings of Toshiba is likely to get diluted.

Steven Rudford

Steven Rudford

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