Auditor partially approves Toshiba's fiscal 2016 books

Toshiba wins auditor sign-off likely avoiding delisting for now

Toshiba Corp.is unlikely to delist from the Tokyo Stock Exchange after PriceWaterhouseCoopers Aarata LLC (PwC) signed off on the Japanese company's financial results. Even if Toshiba manages to agree on a deal in the next few weeks, the sale would still have to be reviewed by antitrust authorities around the world.

That would normally trigger a delisting from the Tokyo Stock Exchange.

The Japanese electronics company pins the losses on the sizable debt incurred by its Westinghouse Electric nuclear power plant, which filed for bankruptcy in March.

There were growing worries that Toshiba may not make Thursday's deadline to supply financial statements for the fiscal year ended in March, as it was at odds with its auditor over multi-billion dollar losses at Westinghouse.

For the previous financial year ending March, Toshiba posted a net loss of 965.7 billion yen (US$8.8 billion), while it also reported negative net worth of 552.9 billion yen.

The bourse is now reviewing Toshiba's governance to decide whether the firm can stay listed.

"For the TSE it all depends on whether Toshiba's (governance) system is improving or not ..."

What have the auditors said?

A senior technology analyst said that while Toshiba's immediate delisting risk has decreased following a qualified opinion by its auditor, the probability of Toshiba getting delisted on the basis of negative shareholder equity has not changed at all.

While the qualified approval gives Toshiba some respite, the company still needs to raise enough funds to avoid remaining in negative net worth for two consecutive fiscal years.

However, PwC also issued a rare "adverse opinion" on the firm´s internal controls, saying losses at its now bankrupt USA nuclear arm Westinghouse were not booked in a timely manner. Toshiba has a history of being in existence for more than 140 years and this delisting would have worsened the condition for the company to raise cash for their memory chip business which is now suffering a huge cash crunch. According to a Japanese securities filing, another USA hedge fund, King Street Capital Management, started buying Toshiba shares in June and now owns 5.81% of the company.

But talks have stalled, causing Toshiba to miss a self-imposed deadline around the end of June to seal a deal after SK Hynix started demanding voting rights instead of providing loans. There was news published in one of the newspapers named Asahi newspaper about the auditors having an adverse opinion about the financial health of the company which would have got it delisted. The sale of Toshiba Medical Systems to Canon a year ago took nine months to clear antitrust screening despite the lack of direct competition between the companies involved.

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