Toshiba Plans To Issue $5.4bn In Shares To Avoid Delisting On TSE

Toshiba Corp recently announced that it plans to raise $5.4 billion from the issuance of new shares as it looks to raise funds urgently and keep the company from delisting. Last week, the company got the necessary approval to proceed with its plan to issue new shares to overseas investors to make up for its financial weakness.

With billions of dollars in liabilities following the bankruptcy of its U.S. nuclear reactor maker Westinghouse, Toshiba has to find a way to raise at least $6.7 billion by March 2018 to avoid getting delisted. Tokyo Stock Exchange (TSE) rules confirm that the exchange will delist a company who has a negative net worth for two consecutive years.

Toshiba has been expecting $18 billion to come in from the sale of its chip unit, Toshiba Memory Corp to Bain Capital. However after going through months of contention over the sale of the unit, the process has been delayed significantly and has put pressure on the company to meet the deadline in March.

Sky News

Toshiba and its US partner Western Digital Corp have yet to settle their dispute over the chip unit sale signed in September. Western Digital argues that the deal heightens the risk of technology leaks and makes it unsound for regulatory reviews. Western Digital has also filed a new arbitration that looks to prevent Toshiba from solely investing in a new chip facility in Yokkaichi, Japan.

With these deals still unclear, Toshiba decided to offset its value and create a positive net worth by issuing the shares equivalent to 35 percent of the company. Over 30 overseas investors are taking a piece of the $5.4-billion pie, which includes Oasis Management Company, Third Point LLC and Cerberus Capital Management.

Goldman Sachs, who is overseeing the sale of the shares, structured the sale solely for overseas companies. Japanese firms are prevented from investing due to the fact that Toshiba only came off TSE’s watch list after an accounting scandal in 2015. In 2015, Toshiba was found to have been overstating its profits by nearly $2 billion in the course of seven years.

Despite the scandal, bankruptcy and the proposed sale of Toshiba’s semiconductor unit, a lot of overseas companies are still willing to take a piece of the 2.28 billion new shares. Toshiba is selling at 262.8 yen per share, which is a 10 percent discount off November 17’s closing price. The sale will dilute 54 percent of the company’s earnings per share.

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