Shares in Toshiba Corp tumbled on Wednesday after it said it would consider a sale of Westinghouse but did not offer any clarity on whether it would proceed with a Chapter 11 filing for the U.S. nuclear unit - a move that could stem losses.
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Toshiba's failure to submit audited third-quarter earnings on Tuesday and its announcement of an expanded probe into Westinghouse also contributed to broad disappointment as did the Tokyo Stock Exchange's placing of the stock on its supervision list.
While the bourse's move was an automatic one that follows Toshiba's failure to clear up concerns about its internal controls a year and a half after a 2015 accounting scandal, it increases the risk of a delisting.
Market participants said the bourse's action meant that the shares were now "untouchable" for institutional investors who cannot invest due to compliance reasons.
Toshiba would be delisted if the bourse is not satisfied with a report on internal controls that Toshiba submitted on Wednesday. The report, required since the 2015 accounting scandal, must also address internal control lapses since then.
"Crucial details about Westinghouse won't be there. Toshiba is already in trouble for delaying the filing of its quarterly earnings twice, and without the complete report, the exchange is unlikely to find its report satisfactory," said Fumio Matsumoto, a senior fund manager at Dalton Capital Japan.
Chief Executive Satoshi Tsunakawa sidestepped questions about a potential Chapter 11 filing for Westinghouse on Tuesday, saying only there were various options. Sources have said bankruptcy lawyers have been hired as an exploratory step.
Shares in the TVs-to-construction conglomerate slid 7.5 percent in early trade. They have plunged by more than half since December, slashing the company's market value to $7.4 billion.
Masayuki Doshida, senior market analyst at Rakuten Securities, said too much uncertainty surrounded the firm.
"For how much can it sell the chip business? When will it release its earnings? Will it remain listed? And can it sell Westinghouse? We are just getting more questions," he said.
Toshiba will meet with creditor banks later on Wednesday to explain the situation, sources familiar with the matter said.