June 16, 2017 3:08 am JST

Market Scramble: Speculators shrug off Toshiba risks

Shareholders seen untouched by conglomerate's many woes

YU SHIMADA, Nikkei staff writer

TOKYO -- Speculators cheerfully continue to trade Toshiba as it faces a real risk of eviction from the Tokyo Stock Exchange, taking a cue from a Japanese market that usually lets shareholders off the hook in all but the worst circumstances.

Selling initially prevailed Thursday to send Toshiba down nearly 6% at one point. But buyers gradually gained ground, and the stock ended the day up 1%. Toshiba was the second-most-heavily traded equity on the TSE's first section, with more than 100 million shares changing hands.

Toshiba first acknowledged the possibility of massive losses on U.S. nuclear operations Dec. 27. The unusual statement, which did not even give a full picture of the scale of the losses, was nonetheless followed by a rebound in the stock.

"We couldn't justify [holding Toshiba shares] to investors, so we sold them all off except the ones for index-linked funds that we couldn't get rid of," said a Japanese-equities broker at a major fund manager. Shares unloaded by fleeing long-term investors ended up in the hands of speculators, including foreign hedge funds and retail investors.

The number of Toshiba shares traded between Dec. 27 and Thursday equals roughly 4.9 times the company's outstanding shares. Turnover during this period totaled about 4.9 trillion yen ($44.3 billion) -- roughly on a par with that of Toyota Motor, whose market capitalization is far larger. Short-term investors trading based on day-to-day news now constitute a major bloc of Toshiba shareholders.

A critical part of Toshiba's turnaround plan, the sale of spun-off flash memory unit Toshiba Memory, remains mired in uncertainty. The conglomerate also sits on a TSE watch list because of earlier concerns about its internal controls and could end up delisted, depending on the results of a review the bourse is currently conducting. Toshiba is also set to miss the deadline for submitting a key financial statement.

Speculators are unfazed by these issues because they know that delisting would not necessarily be a fatal blow.

Seibu Railway, now Seibu Holdings, was removed from the TSE after being found in 2004 to have falsified shareholder information. Holding on to Seibu shares paid off handsomely when the company returned to the exchange in 2014, a 50-something investor here said.

Speculators may sing a different tune in the event of a capital reduction that lowers Toshiba's share price to zero. But such measures are limited to dire situations, like legal liquidations. Tokyo Electric Power Co. Holdings, which ultimately received a publicly funded bailout after the 2011 Fukushima Daiichi nuclear disaster, did not need to resort to such a drastic step.

Even in the corporate bond market, which is more sensitive to credit risk, prices on Toshiba's debt have not moved much. "Put simply, market participants don't expect a sudden bankruptcy or default," said Mana Nakazora of BNP Paribas Securities (Japan).

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 11,714.87M
Shares: 4,237.60M

Toyota Motor Corp.

Japan

Market(Ticker): TKS(7203)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 171,736.71M
Shares: 3,262.99M

Seibu Holdings, Inc.

Japan

Market(Ticker): TKS(9024)
Sector:
Industry:
Consumer Services
Other Consumer Services
Market cap(USD): 6,637.23M
Shares: 342.12M

Tokyo Electric Power Co. Holdings, Inc.

Japan

Market(Ticker): TKS(9501)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 6,653.80M
Shares: 1,607.01M

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