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Investors Abandon Toshiba Amid $1.3 Billion Accounting Scandal

Toshiba Amid $1.3 Billion Accounting Scandal

Investors abandoned Toshiba Corp as the Japanese company continues to be embroiled in a $1.3 billion scandal. Resolution of the accounting scandal does not seem any close as new information continues to be released about the losses incurred at the nuclear unit in Westinghouse, U.S.A.

Investors Abandon Toshiba Amid $1.3 Billion Accounting Scandal

The mega company, known for its laptops to nuclear business, confirmed reports in the media about the massive losses incurred in financial year 2012-2013 at its nuclear plant in Westinghouse.

Toshiba was quick to report that the company did not need to disclose these losses because the Westinghouse business is generally profitable.

However, Toshiba’s shares have already fallen by up to 39 percent following revelations by the company about accounting errors in April. Shares fell by as much as 9.2 percent this past week, a three-year low as investors panicked over the company’s ability to bounce back from the accounting scandal and regain its reputation soon.

At the end of the day’s close on Friday, Toshiba shares had fallen 5.4 percent

According to Nicholas Smith, a CLSA strategist, this recent news about the company came at a time when investors were almost wagering that Toshiba shares would recover.

Smith said, “Some of the brave funds were seriously considering betting that Toshiba would recover and now they are just lucky they did not do it too soon.”

Toshiba revealed that it has been exaggerating its profits by an estimated $1.26 billion over a period of about seven years. In July, an independent audit indicated that the company was experiencing transparency issues especially in management and employees were discouraged from questioning the management.

Inflated Assets

For a long time now, there has been speculation that the value of the assets at Westinghouse, with 87 percent belonging to Toshiba, has been inflated amid the declining appeal of nuclear power.

According to Martin King, a managing director at Tyton Capital Advisors now could be a good time to buy Toshiba shares.

“The company’s governance is ridiculous right now but Toshiba has profitable businesses. Now would be a good time to think about allocating.”

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