Toshiba (TOSYY) stock dropped in Tokyo Friday on reports it's considering a capital increase as it faces an equity shortfall that threatens it with delisting next year.
Toshiba shares closed 5.11% down at ¥297, outpacing the 0.82% fall by the Nikkei. The company's ADR listing fell 7.91% on Thursday.
The Japanese conglomerate is said to be looking at the option of raising about ¥600 billion ($5.3. billion), a person close to the matter told Reuters.
The company has shopped for brokers and has received several proposals from domestic and overseas brokerages to raise the money through a public offering or a third-party allotment, the person told Reuters. Toshiba is said to also be looking at the option of allocating shares mainly to overseas investors.
Toshiba has been desperate for cash to meet liabilities from its failed U.S. nuclear unit Westinghouse Electric and cover a negative equity shortfall that threatens it with delisting next year. The group posted a 76% increase in consolidated earnings of ¥135 billion for its second fiscal quarter with almost all that profit and growth contributed by the memory unit, which posted profit of ¥131.4 billion, up 140%.
However, much of that growth was attributed to the company's chip business. Strip out the memory business and Toshiba's growth over the quarter would have gone into reverse. Operating income, excluding Storage & Electronic Devices, would have been ¥3.64 billion, down from ¥22.7 billion a year earlier, equating to an 84% decline.
Toshiba is selling 49.9% of the memory chip unit to a Bain Capital-led consortium for ¥2 trillion.
Toshiba, also on Thursday, announced it will increase capital investment in its chip business to ¥600 billion, up from ¥400 billion, and bring the investment forward to the current financial year. The aim is to fast track the installation of a new memory chip production line at its Yokkaichi site.
"Demand for TMC (Toshiba Memory Chip) next generation 3D Flash memory devices is increasing significantly on fast growing demand for enterprise SSDs (solid state drives) in datacenters, SSDs for PCs, and memory for smartphones," Toshiba said in a statement. "TMC expects strong market growth to continue in 2018 and beyond."
- Paul Whitfield contributed to this report
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