Toshiba removed from delisting watchlist at Tokyo stock exchange

Toshiba Corp could be delisted if it fails to meet the listing requirements.
Toshiba Corp could be delisted if it fails to meet the listing requirements.PHOTO: REUTERS

TOKYO (BLOOMBERG) - The Tokyo Stock Exchange said it removed Toshiba from its watchlist for delisting after seeing better internal controls and efforts to improve corporate governance.

Toshiba has made progress with its bookkeeping since an accounting scandal in 2015 and the disclosure of multibillion-dollar losses in its nuclear business in December, the exchange said in a statement on Wednesday (Oct 11).

The company still has negative shareholders equity and could be delisted if it isn't able to meet listing requirements, the exchange said. Toshiba signed an agreement on Sept 28 to sell its flash memory chip business to a group led by Bain Capital for about 2 trillion yen (S$24.4 billion), in an effort to reach positive shareholder equity.

Toshiba, which was was demoted to the second section of the exchange in August, needs to complete the deal by March. While the exchange's decision on Wednesday was mainly due to improved controls and efforts to bolster corporate governance, it's also a sign that the financial authorities expect the Tokyo-based company's balance sheet to recover.

The Bain consortium includes major technology players Apple, Dell, SK Hynix and Japan's Hoya, while Toshiba itself will maintain a stake, the company said when it announced the memory chip deal.

The total value of the transaction may change depending on capital expenditures. The deal is aimed at keeping control of an important business in Japan, while securing the funding needed to help Toshiba repair its damaged balance sheet. The company expects the deal to close by March 31.

Separately, earlier on Wednesday, proxy advisers Glass Lewis & Co. and Institutional Shareholder Services called Toshiba's governance into question and recommended that investors vote against approving earnings results at the shareholders meeting later this month.

The company hasn't been able to secure an unqualified endorsement from its auditor, the two United States firms said in separate reports, and recommended voting against president Satoshi Tsunakawa's renomination to the board.