Toshiba Issues $5.4 Billion in New Shares to Investors Overseas

Toshiba Corp’s planned new share issue of $5.4 billion to investors overseas will provide the company with the majority of funds needed to avoid being delisted. The deal was arranged very quickly and underscores the weakness of finances it has, and the allure of the company’s chip unit.

Burdened by liabilities in the billions of dollars at its maker of nuclear reactors in the U.S., Westinghouse that is under bankruptcy protection, Toshiba has sought to come up with the difference prior to the end of its financial year, which is in March, or face being delisted.

A contentious and long auction for its chip unit valued at $18 billion has meant it is not able to rely on the funds arriving on time.

The issue of new shares, decided on Sunday during a board meeting, is equal to a stake of 35% in the struggling conglomerate based in Japan, and will include over 30 investors overseas such as Oasis Management Company, Cerberus Capital Management and Third Point LLC.

This deal, which Goldman Sachs put together, was structured for investors overseas as Toshiba had just recently come off the watch list on the Tokyo Stock Exchange that it was on following an accounting scandal in 2015, making it very difficult for local firms to make an investment.

For some of the investors overseas, it will be an solid investment if even for some reason the agreed to sale of Toshiba Memory, the second largest producer in the world of NAND chips, to a Bain Capital led consortium falls through.

And if this sale manages to make it through all the legal challenges and move forward, Toshiba will continue to own 40% in its semiconductor unit.

Two things could help after March for Toshiba; it will have a business with a stake of 40% in Toshiba Memory and large amounts of cash on hand; or a company that continues owning a very good business, said one investor who took part in the issue of shares, but did not give his or his company’s name.

Toshiba is planning to sell over 2.28 billion in new shares at a 10% discount to the close of business on Friday.

The move will create a huge dilution of 54% in earnings per share. However, Toshiba’s shares, ended down at 5% as the risk of being delisted has been largely removed and as a rise in capital is expected.

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