Elpida Shares Plunge 97% After Stock Limits Removed: Tokyo Mover

Elpida Shares Plunge 98% After Stock Limits Removed
Elpida Memory Inc. memory chips. Photographer: Tomohiro Ohsumi/Bloomberg

Elpida Memory Inc., which has filed for Japan’s biggest bankruptcy protection in two years, plunged 97 percent after the Tokyo stock exchange removed daily limits.

The stock fell 247 yen to 7 yen after dropping to as low as 4 yen at the close of trading on the Tokyo Stock Exchange. Elpida’s 0.5 percent convertible bond due October 2015 plunged 60 yen to 14 yen per face value of 100 in Tokyo as of 4:56 p.m. from Feb. 27, according to Barclays Plc.

The last Japanese maker of computer-memory chips, which lost money for five straight quarters, sought protection at the Tokyo District Court on Feb. 27 with liabilities of 448 billion yen ($5.5 billion), according to a filing with Japan’s finance ministry. Elpida’s woes came as the Tokyo-based company failed to mimic South Korea’s Samsung Electronics Co. in diversifying into specialty memory needed in mobile handheld devices such as Apple Inc.’s iPad and iPhone.

“Elpida’s shares are worth zero after the delisting announcement,” Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co., said by phone today.

The Tokyo Stock Exchange will apply regular daily trading limits to Elpida shares from tomorrow. The bourse had yesterday removed limits on how far the stock could move in a day.

Elpida’s rivals in South Korea advanced. Samsung rose 1.8 percent to 1.2 million won in Seoul and Hynix Semiconductor Inc. added 1.2 percent to 30,200 won. Micron Technology Inc., the Boise, Idaho-based chipmaker that will probably emerge as the top winner from Elpida’s bankruptcy filing, rose 3.7 percent to $8.88 in New York yesterday.

Elpida President Yukio Sakamoto met with creditors in Tokyo today to explain bankruptcy procedures, including drawing up revival plans.

DRAM Prices

Elpida, Hynix and other makers of DRAM chips lost a combined $14 billion in the past three years, according to Bloomberg calculations.

Troubles at Elpida were exacerbated by DRAM prices falling 85 percent and a stronger yen that cuts overseas sales when repatriated. Japan’s government and banks bailed out the company in 2009 with 140 billion yen in financial aid and loans.

Elpida said it defaulted on six bonds as they came due for redemption Feb. 27, according to a company statement. The face value of the bonds totaled 138 billion yen, according to data compiled by Bloomberg.

The supplier to companies such as Apple said earlier this month it saw “uncertainty” over remaining in business because it might not have the necessary financing. Elpida hadn’t been able to reach a deal with the trade ministry, the Development Bank of Japan and its main lenders over financing for 92 billion yen in bonds and loans due by April, the company said Feb. 14.

Japan Airlines

Elpida’s bankruptcy would be the nation’s biggest since Japan Airlines Corp. sought protection in January 2010 with 2.32 trillion yen in liabilities, according to data from Tokyo Shoko Research. Elpida employed 5,898 people as of March 31, according to data compiled by Bloomberg.

Bondholders of the chipmaker may salvage more cash than investors in Japan Air.

The recovery rate for the failed chipmaker’s notes would be about 19 percent, according to Bank of America Corp. Deutsche Bank AG predicts between 10 percent and 20 percent, compared with 12.5 percent for the airline that emerged from bankruptcy protection in March 2011.

Elpida got 140 billion yen in financial aid and loans from the government and banks in 2009 after falling chip prices caused it to post a record loss.

DRAM prices plunged to a record low last year after PC shipments missed analyst forecasts and sales of Apple’s iPad surged. The price of the benchmark DDR3 2-gigabit DRAM declined to a record 71 cents in November, compared with $4.85 on Sept. 1, 2010, amid slowing PC sales, according to Taipei-based DRAMeXchange, Asia’s biggest spot market for the chips.

DRAM is the most common chip in computers. Samsung controlled 38 percent of the market by revenue last year, according to data compiled by Bloomberg Industries. Hynix held a 25 percent share and Elpida 18 percent.

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