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Toshiba's market value takes $6 billion hit over problems with U.S. nuclear business

by Lauren Dubinsky, Senior Reporter | December 30, 2016
Business Affairs
Shares fell by 40 percent
With the Canon deal officially in the rear view mirror, Toshiba has come upon new financial hardships stemming from its U.S. nuclear business, resulting in shares plummeting 40 percent since Tuesday and a market value slashed by $6 billion.

Toshiba reported this week that unexpected inefficiencies in the labor force and other factors related to the nuclear unit were driving up costs, according to a Wall Street Journal report.

Toshiba acquired a 77 percent stake in Westinghouse Electric Co. in October 2006 for $158 million with the goal of becoming a world leader in nuclear power, according to a statement it released at that time. Westinghouse, in late 2015, purchased a nuclear construction and services business from Chicago Bridge & Iron for $229 million.
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Toshiba’s chief executive, Satoshi Tsunakawa, stated that the nuclear business issues would force the company to take a write-down of up to several billion dollars. The exact amount is expected to be announced in February.

A general feeling of uneasiness about Toshiba’s current circumstances has lead investors to sell their shares, according to a BBC News article. That means fewer new funds can be raised by selling shares, so the company may have to borrow from banks or sell off parts of its business.

Toshiba recently sold its medical business to Canon for over $6 billion. The deal was to help offset damages from a $1.3 billion accounting scandal involving overstated profits and false bookkeeping since 2009.

The company came under more scrutiny for how the acquisition was carried out. Toshiba avoided potential regulatory hurdles by selling Canon a legal entity with $300 in capital that was created only for the transaction.

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