Business / Financial Markets

Toshiba shares recover from early plunge on report of new accounting scandal

Bloomberg

Shares of Toshiba Corp. recovered from an early dive after the Asahi Shimbun reported regulatory concerns about the company’s earnings.

Toshiba closed Wednesday down 2.01 percent at ¥277.4 in Tokyo after slumping as much as 6.9 percent in early trade. Japan’s Securities and Exchange Surveillance Commission suspects the company padded earnings by about ¥40 billion ($339 million) in the three fiscal years through March 2014, the Asahi reported, citing unidentified sources. Toshiba didn’t immediately respond to a request for comment.

Toshiba shares have been under pressure for more than a week after announcing it may write down billions of dollars at its energy unit. That news came as the company, which also makes personal computers and memory chips, recovers from an accounting scandal in 2015 that claimed the jobs of three presidents, led to record losses and prompted job cuts and the sale of businesses.

Investors have priced in a lot of bad news and the focus is shifting to positives, such as the company’s semiconductor business, according to Masahiko Ishino, an analyst at Tokai Tokyo Securities.

“The market instead seems to be focusing on the strength in the semiconductor names,” Ishino said. “Whether it is their nuclear or other businesses, Toshiba is an organization that possesses very beneficial technology for Japan. And that’s the frame-of-mind we should be taking when looking at this.”

Semiconductor names rallied globally after Wells Fargo & Co. analysts said they saw a chip recovery gathering momentum in 2017. Micron Technology Inc. gained 2.9 percent on Tuesday in New York, while Japan’s Sumco Corp. climbed 3.3 percent on Wednesday.

Toshiba shares slumped 37 percent last week after announcing the potential write-down.

The company is likely to take emergency actions such as selling more assets and negotiating with unions, Claudio Aritomi and Amit Garg, analysts at CLSA Ltd., said in a report last week. The company may also need to carefully work with lenders for continued support.

“Negative news flow is likely to continue near term, but we expect a rebound once fears of the bankruptcy/delisting scenario starts receding,” the analysts wrote in the report.

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