Toshiba Corp has wiped almost $5 billion off its value in two days and prompted a credit rating downgrade on Wednesday, as the company grapples to plug a potential multi-billion dollar hole.
Toshiba said late on Tuesday that cost overruns at a U.S. nuclear business it bought from Chicago Bridge & Iron last year, CB&I Stone & Webster, meant it could face ‘several billion dollars’ in charges, acknowledging a bruising overpayment.
It did not comment on whether that would wipe out its asset value and tip the company into negative net worth. Executives said it could take until February to pinpoint the exact impact.
Toshiba shares, however, took an immediate hit on Wednesday, falling 20 per cent to hit the Tokyo exchange’s daily downward limit. That follows a 12 percent drop on Monday after initial warnings from the group.
Investors fretted that a blow to the group’s finances could even weaken its competitiveness in its core semiconductor business – specifically investment in 3D NAND, a new advanced type of flash memory – or result in fire sales and dilutive share issues.
For the first time in seven years, the value of the group fell below that of tech rival Sharp.
Rating agency Standard & Poor’s downgraded Toshiba, already in junk territory, to B- from B, with a “negative” outlook. S&P said it expected shareholder equity to “drastically shrink” as a result of the write-down, eroding the group’s resilience, while expected higher working capital would burn more cash.