Photographer: Tomohiro Ohsumi/Bloomberg

Toshiba Shares Climb After Effissimo Becomes Top Shareholder

Updated on
  • Singapore-based hedge fund owns stakes in Ricoh, Japan Display
  • Toshiba faces massive writedown in nuclear-equipment business

Toshiba Corp.’s shares jumped as much as 10 percent after a hedge fund disclosed that it had become the embattled conglomerate’s biggest shareholder, fueled by optimism that the company will be able to cope with a looming multibillion-dollar writedown from its Westinghouse nuclear-equipment business.

Effissimo Capital Management Pte held 8.1 percent of Toshiba as of March 15, according to a regulatory filing Thursday, making it Toshiba’s top shareholder. The Singapore-based investor declined to comment. Toshiba shares were 8.2 percent higher at the trading break in Tokyo on Friday.

The stake is worth about 77 billion yen ($690 million) based on Toshiba’s current price, although it’s not clear whether the fund’s ownership has changed since the filing’s date of record. The hedge fund, which seeks to invest in undervalued Japanese companies, has taken stakes in Ricoh Co., Japan Display Inc. and Kawasaki Kisen Kaisha Ltd. Osaka Steel Co.’s shares jumped 8.9 percent on Oct. 28 after Effissimo disclosed a 5 percent stake in the steelmaker.

“Effissimo is clearly taking a multiyear view and they are willing to believe in Toshiba even though they’re still going through some very difficult times,” said Damian Thong, an analyst at Macquarie Group Ltd. “Once they can make the memory business sale done and file for Chapter 11 of Westinghouse, their biggest challenges will be passed. If they can solve their problems, the prospects of a turnaround and an upside are high.”

Effissimo, which began making investments in 2006, is the first investor with an activist history to target Toshiba. The hedge fund was set up by former colleagues of Japanese activist investor Yoshiaki Murakami, but are no longer associated with him. While funds in Japan usually declare whether they are just making an investment or planning to be an activist, Effissimo indicated in the filing that it was making an investment in Toshiba on behalf of clients, suggesting that it’s keeping all options open.

Toshiba is reeling from a potential 712.5 billion yen writedown in its Westinghouse nuclear unit. To restore its balance sheet, the company has put its prized memory chips business up for sale, while considering the bankruptcy of Westinghouse. The company has missed two deadlines to report earnings as it seeks to assess the financial impact and get auditors to sign off on its results.

Toshiba said on Thursday that Westinghouse’s board will decide whether to file for bankruptcy, suggesting that it’s one of the options under consideration. That has also helped to support the company’s share price. Kazunori Ito, an analyst at Morningstar Investment Services, said a Chapter 11 process is “really the only way for Toshiba to limit the risks of further losses in the business.”

The sale of the memory chips unit is trickier. Toshiba initially floated the possibility of selling a minority stake, but later said it was willing to sell a majority of the business. So far about 10 parties have expressed interest in the semiconductor division before an end-March deadline, but there have been questions about whether Japan’s government would allow it to be sold to a Chinese or Taiwanese company. Nevertheless, there haven’t been any expressions of interest from Japanese companies, a Toshiba executive said on Thursday.

(Updates with analyst’s comment in fourth paragraph.)
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