Toshiba write-off warning sends its share crashing down 30%
December 28, 2016 – Toshiba is a huge Japanese conglomerate corporation. It is one of the biggest producer of semiconductors in the world. Toshiba is making hundreds of different kinds of products. From home appliances to nuclear energy plants, Toshiba has become a huge corporation. Toshiba is well known for its policy of acquiring rivals and other corporations, a business plan that does not seem to work in their favor as of lately.
Toshiba’s recent troubles started with the 2015 accounting scandal. In the aftermath of this scandal, Toshiba’s market value dropped billions of dollars. Investigation revealed that Toshiba accounting books highly overvalued company’s assets and showed large profits when the actual profits were very less. Toshiba hasn’t recovered from this blow and now it is facing another financial dilemma.
It looks like Toshiba is going to announce another write-off, possibly billions of dollars! This will bring down Toshiba’s net worth further down. Many experts believe that this move will likely force the company to make some big changes. They might have to sell-off some of the worth less companies that they have bought over the years.
The latest write-off is a result of some bad decisions Toshiba made in the last few years. It started when Toshiba bought Westinghouse Electric Corporation, a company that specializes in power generation solutions. Toshiba made this purchase in 2006, just before the 2007/2008 financial crisis. Toshiba paid more than 5 billion US Dollars for this company; even at the time of this purchase, experts expressed their concerns about Toshiba paying much more money than what Westinghouse’s real value is. This acquisition was ill timed and later resulted in a write-off of more than $2 billion.
Despite financial issues and the 2015 accounting scandal, Toshiba went on to buy another nuclear power generation company, CB&I Stone & Webster. This time, Toshiba purchased a totally worthless company. The projects that CB&I Stone & Webster have are running behind schedule and the cost to complete them is much more than what Toshiba initially estimated. The cost is so much that it makes CB&I Stone & Webster net worth in negative figures!
The current announcement of a billion dollar write off has sent Toshiba’s shares down 30% in two days. On Tuesday, Toshiba’s share value dropped more than 10%. Then today, things got even worse. Toshiba’s share dropped 20%, hitting Tokyo Exchange’s daily downward limit.
Toshiba’s passion for nuclear power generation is proving costly. The demand for nuclear energy has decreased over the past decade amid safety concerns and building costs. The nuclear meltdown in Fukushima in 2011 has raised concerns about the safety of nuclear power plants and the dangers of radiation exposure in an event like Fukushima disaster. It looks like Toshiba’s gamble to enter nuclear power generation has failed and Toshiba is going to face tough time in 2017 despite making good money from their semiconductor business.