No news is bad news. For Foxconn and Sharp, that's not a cliche, it's a fact.
In the three weeks since since the Japanese company agreed to sell itself to Foxconn, and the Taiwan manufacturer balked over Sharp's previously unknown contingent liabilities, both parties have been silent. The idea is to hunker down and sort out the misunderstanding.
Far from calming markets, the continued blackout has whipsawed them. Volatility in Sharp's Tokyo-traded shares has climbed to the highest point in eight months, and is heading for levels not seen in almost four years, when the company widened its loss forecast eightfold and had its credit rating cut by S&P.
Since Sharp's announcement Feb. 25 that it had picked a bid by Foxconn over a competing offer from Innovation Network Corp. of Japan, its shares have swung 27 percent. A similar, less dramatic increase in volatility can be seen in the stock of Hon Hai, Foxconn's Taipei-traded flagship, which is up since the disclosure.
Sharp's statement in February caught the Taiwan company, run by Chairman Terry Gou, off guard. Foxconn said it needed time to examine previously undiscovered contingent liabilities. While that was a blow, the fact that Foxconn said it was still working toward a deal -- in which Sharp would sell new common stock for 387 billion yen ($3.4 billion) -- was overall positive.
Sharp might have been too quick on the trigger, or Foxconn might have taken its eye off the ball. Since then, however, public statements from the companies have been few and vague. News reporting on the source of the discord has failed to spur management to clarify.
Neither side has been able to admit clearly that the relationship is on the rocks, or confidently to allay such concerns. If, as appears to be the case, both sides have such mismatched expectations as to render a quick deal unlikely, they should say so. If the quibbles are minor, Sharp and Foxconn should lay them out publicly.
The first step toward fixing a problem is admitting you have one.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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Tim Culpan in Taipei at firstname.lastname@example.org
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