Toshiba Shares Re-Collapse – the US Fiasco

It would be comic if the facts behind it weren’t so ugly.

Toshiba shares crashed 25% in early trading in Tokyo today, temporarily plunging straight through the Tokyo Stock Exchange’s daily downward limit of 20%, before being nurtured back above it. This episode forms part of Toshiba’s ongoing serial collapses and dead-cat bounces that would be comic, if the facts behind them weren’t so ugly.

In late December, Toshiba shares had plunged 42% in three days, hitting the 20% downward limit repeatedly and actually closing at that limit on the second day of the collapse. At the end, its shares traded for ¥253.

In their Lazarus-like manner, however, they keep bouncing after getting crushed. After the December massacre, they bounced 18% in six days, to 300 yen, only to get re-crushed, this time by 28% in six days, including today’s collapse, to ¥215. This daily chart shows the last three months of the dead-cat bounce and the collapse since the end of December:

These are just the latest two episodes of this saga.

Today’s plunge was caused when more details were leaked to Kyodo news agency about the write-offs, cost-overruns, and general fiasco related to its nuclear reactor business in the US. Not just any details, or complex details even, but a simple number. The amount of the new total write-off: ¥700 billion ($6.1 billion).

This in itself is stunning because Toshiba had acquired its nuclear business, namely Westinghouse Electric, in 2006 for $5.4 billion. At the time, Westinghouse was regarded as the nuclear industry’s heavyweight with next-generation reactor projects in the US and China. How can you write off another $6.1 billion on a business you acquired for $5.4 billion? Realities of the nuclear industry just keep on giving.

On December 27, Toshiba had announced that cost overruns at CB&I Stone & Webster – a nuclear construction company Westinghouse had bought from Chicago Bridge & Iron last year – could trigger “several billion dollars” in charges. It would likely take till February to get the exact magnitude of the write-down, it said back in December.

On January 12, the new figure that surfaced at Kyodo was ¥500 billion ($4.4 billion). So now, as February is getting closer, it’s up to ¥700 billion. But February is still a couple of weeks away. And who knows what the next number is.

“Toshiba declined to comment on the reports,” Reuters said today. Which just made things worse.

Toshiba’s entities are trying to complete eight reactors in the US and China. With cost overruns threatening to sink the entire company, it still hasn’t fully disclosed the extent of the problems. All we know is that it is always much worse than previously assumed.

Toshiba is already on a watch list of the Tokyo Stock Exchange and is barred from raising equity capital by issuing new shares to prop up its finances. Its big hope – and apparently the hope of the stock jockeys and hedge funds that keep piling into this stock – was that it could sell a minority stake in its profitable semiconductor business in order to improve its equity position. According to unnamed sources barely two days ago, Toshiba has lined up some potential buyers, including Western Digital Corp.

These are just the latest episodes to make it into the public light. In 2015, the Nikkei uncovered a $1.3 billion accounting scandal and cover-up that crushed Toshiba’s shares and pushed them to a low in February 2016 of ¥155.

But it didn’t take long for the Whac-a-Mole comedy to take over again, and stock jockeys and hedge funds piled back into the shares and drove them up 206% in 10 months to ¥475 by mid-December. Most of the gains have now once again evaporated.

This scandal-ridden company never discloses even massive issues unless forced to, or found out about, or ratted out. Still, even today, no one outside the company really knows what’s going on inside, except that it’s always much worse than it appears, and much, much worse than had been previously disclosed under fire.

But stock jockeys and hedge funds are feeding on this, hoping perhaps for a trade on the bounce that they themselves can engineer by piling into the stock in a big way, and hoping to sell their position to some hapless latecomers and true believers in some new hype and get out before another leak or investigation once again sinks the shares ever closer to nothingness. For the prior episodes of this fiasco company, read… Scandal & Cover-Up Plagued Toshiba Re-Implodes

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  22 comments for “Toshiba Shares Re-Collapse – the US Fiasco

  1. Chicken says:

    Toshiba bet it all on black I think, I don’t believe they’ve been working much on their semiconductor technology.

  2. Tom Kauser says:

    The city?

  3. hidflect says:

    Too bad about Toshiba. When I was living in Japan I always bought Panasonic products. I got a nice surprise to see my headphones worn by “Neo” in the Matrix. Excellent company. They’ve done well but I may plunge some cash their way now I’ve made a bit off these Western Australian Lithium miners. Avoiding the property here just as Wolf highlighted a few days ago.

  4. Meme Imfurst says:

    God works in mysterious ways. Perhaps stealing secrets about the US submarines, and especially the classified construction of the props, and then selling that technology to both the Russians and Chinese is coming home to haunt them.

  5. R. Seckler says:

    Unfortunatly, when projects hit cost over-runs, short-cuts are takn. Not a great idea with nuclear.

  6. DV says:

    This is all pretty obvious. The Western nuclear companies, be it Areva or Westinghouse, have not built nuclear reactors for decades. So when their “next generation” designs were full of design faults. After many years of construction, not a single one in operation yet. Areva is about to be bailed out by the French government, Toshiba is likely to think together with the Westinghouse. They all contracted with the customers for new designs essentially on fixed price basis. If Areva’s Finnish fiasco is any indication, the cost overuns together with penalties amy be triple the originally quoted cost. So if Toshiba has eight uncompleted reactors with cost overuns of, say 1.5-2 billion each, that would be more or less 10 billion. Time to file for Chapter 11.

    • nhz says:

      I think it isn’t just because of lack of recent experience with building reactors. This is an industry that has enjoyed an eternal put option from the government because of military reasons and national prestige, no reason to be profitable or efficient.

      In Netherlands we have three nuclear reactors. The first small ‘commercial’ nuclear reactor was shut down many years ago, it always was a financial black hole and decommissioning has been postponed for an indefinite time ‘to study the options’. Second is a small ‘research’ reactor that now produces medical radio isotopes, has constant technical problems and huge problems with waste disposal, and has now requested a government bailout that is many times bigger than what the whole business is worth (and even then they are assuming the government will pay for all their nuclear waste disposal). Of course, if the reactor management doesn’t get their bailout “many cancer patients will suffer” so politics will pay up, one way or another ;-(

      The third one is an aging commercial reactor that is threatening to bankrupt the province of Zeeland, where idiot politicians cheered nuclear 50 years ago and it has been ‘the gift that keeps on giving’ forever since, in a negative way except for the local politicans who got plush jobs from it. The reactor is now owned mostly by the regional government, who tried to sell it to foreign power companies previously, and now tries to transfer ownership (for free) to the national government because they are finally starting to wise up about the long term costs of nuclear. But the national government has refused to step in for now, probably they understand what is at stake.

  7. william says:

    In the laptop world, Toshiba was an anomaly. All the industry insiders agreed Toshiba was not profitable in laptops yet remained in the business much too long.

  8. nick kelly says:

    Ontario Hydro- bust largely because of nuclear.
    Toshiba- bust because of nuclear
    France’s big outfit ( the one building Hinckly Point in UK) bust because of nuclear (I think that’s all this one does)

    So is anyone doing ok at this- I mean a genuine profit, after amortizing clean up etc.?
    After the tsunami and the Japanese melt down, Angela Merkel went to her office, told them to hold all non-urgent calls and went into the tank.
    A week later she emerged and announced: we’re getting out of nuclear.
    It was a shocker for the German industry because it was weeks from firing up one of the world’s biggest reactors, just after a multi- year, expensive refurb.

    France could really be in trouble. It’s something like 90 percent nuclear, with many reactors and the industry is looking for a bailout.
    It needs the UK Hinckley Point deal badly.
    At the risk of sounding nasty- one way of financing a nuke habit is to hook someone else.

    • bill says:

      But I thought nuke was supposed to provide energy too cheap to meter.

    • nick kelly says:

      Just did a bit of reading on the French reactors – a disaster.
      20 of 58 plants are off line. They are riddled with sub-standard castings (pipes and fittings etc. ) with carbon content up to 100 % over specs and localities with even higher content. This makes the steel prone to failure.
      There is no quick fix and critics doubt that the source- the foundry at Le Creseuot (sp?) ever had the ability to perform the work to the required standard. It’s been the supplier since 1965.

      • nhz says:

        I remember reading an extensive report about the French nuclear industry around 1980. It was all a technological nightmare even then: nothing worked, e.g. technicians were standing knee-deep in contaminated waste water all the time, sawing or mending pipes by hand because even the most basic installations had failed due to corrosion, design faults, lousy construction etc. They haven’t learned a bit since then.

        I knew the engineer who had to certify the reactor vessel for the commercial nuclear power station near my city. He refused to certify it because there were obvious cracks and as a result he was fired (and referred to a psychiatrist …). We are now learning that most of the nuclear reactors in Netherlands and Belgium have such cracks in the main reactor vessel, and plenty of cracks in the pipes. In addition to that, recent history has shown that is is extremely easy for terrorists to enter these reactors as a service worker and wreak havoc …

    • nhz says:

      “So is anyone doing ok at this”

      You bet: plush jobs for politicians and managers wherever you look. It doesn’t make any difference if these companies make a profit. In my province regional politicians get 50.000 euro’s a year for a position on the board of the nuclear plant, which means officially attending 12 board meetings a year but in reality most of them don’t ever show up. So that’s 50.000 euro’s bribe for at best a few hours of work. The local labour politician who arranged the building of the nuclear reactor 50 years ago got an almost free home (current value around 1.5 million) from the power company; some questions were asked, that’s about it. And that’s what we officially know. So much money is going on in this industry that nobody can track the spoils, just like the Pentagon losing track of a couple billion every year. This is what keeps this nuclear charade going on forever.

      Despite all the hard facts, some politicians are even now arguing for another big nuclear reactor in the Netherlands (even more plush jobs and bribes!!!).

  9. robt says:

    Shades of Candu, the Canadian fiasco that ate 30 billion dollars of tax money, and met its demise, sold for 15 million dollars a few years ago.

    Exporting disaster: The Cost of Canada’s Candu Reactor Program

    • nick kelly says:

      And don’t forget giving India the A-bomb. And after they swore they wouldn’t use the Candu for making one…
      I thought I was the only guy who told fibs.

      This forced previous non-nuke Pakistan to build its own

      • nhz says:

        Yes, and where did get Pakistan their nuclear bomb material?

        From the nuclear industry in the Netherlands where one of their high level nuclear engineers was allowed to work with ultracentrifuges for nuclear enrichment, allowing him to steal plans and material; all with full cooperation from politicians and government officials. Probably all planned and encouraged by the US, because the Dutch would never dare to do such a thing on their own.

        the easiest way to encourage nuclear proliferation is to have a thriving nuclear power industry …

  10. Russellreader says:

    Not to mention that the rate of nuclear reactions is rising whereas engineers wrongly expected that the rate would be stable and engineered the reactors accordingly. Tesla says that radiation is energized from outside. Why would we expect such energies to remain stable when we have difficulty measuring them? Do stars remain stable or do they vary? Schauberger says dynagen fields pass through all materials and warns against nuclear as it emits powerful dynagen fields and excess causes cancer. Reich warned that radioactive substances exponentially expand DOR energies. Russell warned that radioactive substances should never be brought above ground as their purpose is to break down rocks in the earth. So nukes are only constructed by fools as all substances (including people) will degrade more rapidly than predicted as the atom’s desire to stay together is eroded.

  11. nhz says:

    in Netherlands there is an old saying in the anti-nuclear movement, “kerncentrales: met vernuft gebouwd, met verstand gesloten”.

    Translation would be roughly “nuclear power: build with ingenuity, closed with intelligence”.

  12. nhz says:

    P.S.: what is the problem, why cannot Kuroda & company provide unlimited finance to Toshiba? Mario Draghi would love such a financial black hole …

  13. Andrew says:

    i once had a Toshiba laptop and the hard disc drive failed after two years, cost me 1/2 the original price to replace it. Nver had an issue with any other brand of laptop. If they make nuclear reactors the same way they make laptops, run for cover!!

    • hidflect says:

      Same here. 2 years ago the wife bought a Toshiba Satellite when on holiday in Japan. The thing was so flimsy, every time you picked it up the board inside bent and it shorted off. Took out the HDD, bent the POS over my knee and threw it in the trash in fury. Wasn’t going to go back to Japan to claim a refund.

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