On Wednesday, Toshiba Corporation saw its shares go down by 10%. The agent that caused this massive regression is mainly the news according to which the company is going to sell a majority stake in its new chip unit. This decision appeared after a multibillion writedown caused by losses the company had within its U.S. nuclear unit. Toshiba Corporation is now going to cover the budget hole by selling assets from a different division.
With the March 27 deadline for a delisting on his mind, Satoshi Tsunakawa the Chief Executive of Toshiba Corporation decided to sell the entire chip unit if possible. This is a different approach from a previous decision. Before this statement, Toshiba pursued selling only 20% of this type of business. As a consequence, investors are in a difficult position. They have to reassess the odds for a prosperous future if they continue to stay with Toshiba Corporation. The fact that the company is departing from one of its most successful projects poses the question if the gain isn’t going to be a short-term one. After Samsung Electronics Ltd, the NAND chip producer is the best in the entire world.
The chief strategist at Rakuten Securities, Mayasuki Kubota, is of the opinion that in order to mitigate a turnaround situation, a company is advised to keep its most precious possessions. The budget hole should be covered with the sale of businesses that have been underperforming for a long time now. Kubota continued his statement by predicting that the road Toshiba started off on would not end up being a long-term success.
The reason why Toshiba is resolute in departing from its strongest business point is to cover a multibillion writedown. On Tuesday, the multinational company didn’t comply fully with the request of making public its third-quarter earnings that were already audited. This cover up was explained by the claim that Toshiba needs more time to solve some issues within its Westinghouse division. The $6.3 billion writedown is going to affect the equities of the shareholders as well.
As a consequence, Toshiba received a deadline of March 14 to get its numbers straight. If the company doesn’t comply with these terms by the end of that date, it is going to go through a delisting. This is why Toshiba spokespersons are meeting with bankers on Wednesday to discuss further details about this tense situation.
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