Toshiba CEO "Apologizes" After Stock Plummets On Latest Accounting Scandal

Tyler Durden's picture

Last July, a pillar of so-called "Japan Inc" crashed when Toshiba admitted it had inflated profits by a stunning $1.2 billion for no less than 7 years, with fabricated figures amounting to 30% of the company's "profits" since 2008.

In the immediate aftermath of the scandal becoming public, Toshiba's then-CEO Hisao Tanaka said after a 15-second bow of contrition, that he “felt the need to carry out a major overhaul in our management team in order to build anew our company." “We have suffered what could be the biggest erosion of our brand image in our 140-year history."  As a result, Tanaka, who together with five members of his senior staff, resigned after bowing down to, and apologizing to investors.

 

Tanaka et al: "Sorry we got caught"

Of course, the only reason Mr. Tanaka apologized and resigned is not because he was actually cooking books the for an unprecedented 7 years, a period during which the CEO most certainly received tens if not hundreds of millions in equity and profit-linked compensation, but because he was caught. This was confirmed because none of his bonuses had been clawed back even as "a panel of external lawyers and accountants said on Monday there was a “systematic” and “deliberate” attempt to inflate profit figures amid a corporate culture in which employees were afraid to speak out against bosses’ pushes for unrealistic earnings targets."

Fast forward to Monday, when in its second major scandal announcement in as many years, Toshiba said cost overruns at U.S. nuclear reactors it is building were likely to force a write-down of as much as several billion dollars, clouding its turnaround plan after the 2015 accounting scandal. Specifically, the company said it may have to book several billion dollars in charges related to a U.S. nuclear power plant construction company acquisition, rekindling "concerns about its accounting acumen."

Toshiba's latest writedown would be another slap in the face for a sprawling conglomerate hoping to recover from a $1.3-billion accounting scandal, as well as a writedown of more than $2 billion for its nuclear business in the last financial year."This will come as an additional shock to Toshiba's institutional investors that may further undermine confidence in company management, as well as significantly weakening its international nuclear credentials," said Tom O'Sullivan, founder of energy consultancy Mathyos Japan.

The warning sent the stock price of one of Japan's largest companies crashing over 10% in Tokyo trading, came just as the Japanese conglomerate seemed to have turned a corner thanks to an upswing in its semiconductor business.

Cited by the WSJ, Toshiba execs on Tuesday said the company was looking at emergency steps to raise funds, including borrowing from its main banks. They said they couldn’t rule out the possibility that Toshiba’s U.S. nuclear-power subsidiary, Westinghouse Electric Co., would fall into negative net worth as a result of the write-down.

But most notable, or perhaps frustrating to Toshiba shareholders, is that Toshiba's new CEO, Satoshi Tsunakawa, who only took the helm in June, also took the "apologetic" way out, and became the latest boss of the company to bow before the cameras after the 2015 scandal, which led to a clean sweep of top management after the company acknowledged it had padded its financial results for years.

“I apologize to shareholders, business partners and all stakeholders for the trouble we have caused,” Mr. Tsunakawa said in a news conference at the company Tokyo headquarters.

Tsunakawa: "Sorry we couldn't do math"

Well, if that isn't sufficient to absolve the CEO and his company, not to mention investors, of gross stupidity and perhaps, criminality, we don't know what is.

He continued: "We would have needed to boost our capital base anyway because our shareholders' equity ratio is low" the CEO said in a press conference.

According to Reuters, as of end-September, Toshiba had shareholders' equity of 363 billion yen, or just 7.5 percent of assets, which could fall close to zero if the company is forced to log significant losses. Asked if Toshiba's liabilities would exceed its assets, Chief Financial Officer Masayoshi Hirata said the company had not yet completed its estimation of the charge.

Analysts said further write-downs were possible and expressed fears about the nuclear business weighing down the company, which makes everything from elevators to electronic devices. Already, Toshiba took a ¥260 billion impairment charge in its last fiscal year when it downgraded the book value of Westinghouse. Recently, demand from customers including Chinese smartphone makers has helped Toshiba’s core semiconductor unit boost profits. Before news of the nuclear write-down, the company said it anticipated earning ¥145 billion net profit for the year ending March 2017.

Since Toshiba has positioned its nuclear and semiconductors businesses as key pillars of growth while seeking to scale down less profitable consumer electronics units such as personal computers and TVs, we see much more bowing by the company's current and future chief executives in the not too distant future, especially since it is once again management that was openly lying to shareholders, insisting they remain optimistic when the reality was anything but: Ttoshiba executives have often said the nuclear business has a bright future and will remain a core unit despite the global trend away from nuclear power after the Fukushima Daiichi accident in Japan in 2011.

And then the apologies and the bowing began.

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Dr. Richard Head's picture

This isn't news.  With the Fed discount window every publicly traded company is cooking their books...albeit "legally".

 

BaBaBouy's picture

They should AT LEAST take a Pie In The Face...

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) BaBaBouy Dec 27, 2016 4:35 PM

Why didn't BOJ jump in to drive the price up? They were the largest buyer in the Japanese exchange last year.

Grandad Grumps's picture

Lol ... it looks as if they have been trying to do what Goldman Sachs recommended all of the high flying US tech stocks to do ... LIE and create false naratives of what defines profitability. Apparently it works for Goldman and the criminal cronies because they absolutely computer control price.

No loss needs to be logged as long as the lie is continued.

1980XLS's picture

Hari-Kari!

 

Just do it!

It's the honorable thing to do.

resaci's picture

They bought failed solid state drive maker OCZ

Hillarys Server's picture

Safe to walk at night and when people make a mistake they say I'm sorry and kill themselves.

Neat!

scrappy's picture

1989 - Toshiba illegally exported to the Soviet Union sophisticated machine tools needed to manufacture advanced submarine propellers. This sale enabled the USSR to reduce dramatically the noise signatures associated with its undersea forces, making vastly more difficult the anti-submarine warfare missions of allied navies. The cost to the West of restoring the status quo ante is estimated to be in the tens of billions of dollars.

Greed has a way of compromising supposed allies. 

Lot's more on this report. That was just 89. I never forgot, you may commit suicide now.

https://fas.org/irp/congress/1989_cr/h890413-spy.htm

MadHatt's picture

The US has had IUSS stations since 1985.

Submarines are dectected before they leave the harbor.

Make the prop as quiet as you want, the turbine, auxillaries, motors, hydraulic compressors still make noise.

Farmer Joe in Brooklyn's picture

The BOJ just got a 10% discount on Toshiba stock.

Buy it with both hands, Kuroda-san....!!

Hohum's picture

Please, do not worry.

williambanzai7's picture

Bowing is bullshit. Fall on your fucking sword you chicken shit liar...

fulliautomatix's picture

william, such behaviour requires a personally held sense of honour and responsibility. You ask too much.

Aussiekiwi's picture

Bowing is a lot cheaper than paying 5% in fines like the US corps have to do.

silverer's picture

It looked like to me somebody dropped a contact lens.

Herdee's picture

Civil penalties coming in New York.

silverer's picture

Are accounting scandals now "surprises" like unexpected crude oil build up or draw down? Have to add this into the algos...

krampus.'s picture

JP morgan said to buy when the blood is on the floor. Does that mean I should buy after he commits seppuku. 

Aussiekiwi's picture

In America they just pay 5% and admit no liability and move on, this is just the Japanese version.

Panic Mode's picture

We were pushed to buy a toshiba laptop by the school and that laptop is a piece of shit.

krampus.'s picture

Sorry my experance has been they build great laptops. I have had 3, upgrades or bought cheap, never had a problem with them unlike the HP's I've had. Those were a piece of shit. Just my opinion 

onmail1's picture

I confess , I owned a few Toshiba products
which I purchased due to low price

BUT THEY ARE ACTUALLY BEST OF THE BEST

Thumbs up to Toshiba
------------
As a fan I suggest few remedies:

-Price ur products a little higher
Low price == death
-Give something exceptional to the consumer
which a consumer may be proud of (to boast)
-Identify the desire , lets see what I desire :

a. An I7 razor thin Laptop below 1 kg(similar to macbook air) with a gpu (1000 series) that can run oculus or HTC VR also (VR is the future of tech). Develop a contraption which ppl can strap on their back to connect the VR headset. Also develop VR aids for other senses too , smell, rocking chair , sex robot(japan already has) that works with VR, a body suit with thousands of small vibrators (as in cell phones) which work with VR & sex robot.

b. create a robot that can do household chores , washing, cleaning, making bed, mopping, cooking various dishes with attachments i.e. veg. chopper, slicer, which can bake in oven, make tea & coffee, use refrigirator , use washing m/c, hang clothes, treat guests, act as guard etc etc. This will be the most important contribution to humanity.

c. A cell phone which (just like moto) can also have attachments which can also have medical diagnostics too so that busy & old ppl can do self diagnostics & save time time & cost

d. An A4 laser printer with 2 cm thickness with e-ink display on top & scanner too. It should run Windows

e. A personal 3d printer with attachments that can work on various materials plastic, rubber, wood, stone, concrete etc . I imagine building my house with pillars carved from stone or stone / wood carving for decoration & which can also print rubber replicas of heads of celebrities which u can attach to ur $ex robot hah ha