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Toshiba maintains slender hopes of avoiding delisting

September 5, 2017

The company is threatened with delisting by Japan’s stock exchange if it does not take urgent steps to decrease its liabilities

On 1 September 2017, The Japan News reported that Toshiba Corp. faces the prospect of potentially being delisted by the Tokyo Stock Exchange, due to the electronics maker’s decision to once again delay sales of its flash memory chip unit.

Previously there had been talks of forming a consortium, naming the American company Western Digital Corp. as a potential buyer of Toshiba Memory Corp., but relations between the two companies broke down in the final stages of the discussion and the consortium failed to materialise. Toshiba has also faced difficulties over its failure to sign a sales contract in June of this year, despite having selected a consortium of “preferred negotiating partners” consisting of South Korean, Japanese and American entities.

Adding to the electronics maker’s woes, The Japan News reported that as of the end of March 2017, Toshiba’s liabilities had eclipsed its assets by a total of ¥552.9 billion and if the company cannot rectify this by the deadline of the end of March 2018 they face certain delisting according to TSE regulations.

If the delisting goes through, Toshiba’s 360, 000 shareholders will feel the ramifications as the company’s ability to acquire bank loans will diminish and it will not be able to raise any required funds on the stock market.

The key to reversing the company’s currently ailing fortunes is the sale of its “profitable memory chip unit for about ¥2 trillion” – a process Toshiba hopes to complete by the time its deadline of the end of March 2018 arrives. However, there are already difficulties arising surrounding the chip’s potential sale, such as the fact that its completion will require reviews by overseas antitrust authorities and the Japan Fair Trade Commission, which could take at least six months. This factor prompted a source from the negotiations to state that “There won’t be time for the review unless the deal is sealed during August”, an opinion which other observers support.

Despite the looming deadline, within Toshiba there is still failure to reach a consensus on a potential buyer and negotiations with contenders will take more time. There are also fears that Western Digital could take a harder line, after the company “sought to block the sale of Toshiba Memory to another party through the International Court of Arbitration”.

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