Toshiba will return to the top section of the Tokyo Stock Exchange next week, after more than three years as a giant among minnows in its second tier and under near constant pressure from activist shareholders.
The company’s long-awaited readmission means it will rejoin the likes of Sony, Hitachi and more than 2,000 others in the country’s Topix index of top tier shares.
Despite the promotion, Toshiba remains embroiled in an investor revolt led by two of its largest shareholders. In December, it received requests from two activist funds — Singapore-based Effissimo and US-based Farallon Capital — for extraordinary meetings of shareholders.
The simultaneous demands, unprecedented in Japan, and which Toshiba has taken initial steps to accommodate, call on the company to do more to explain its overseas acquisitions plans and to investigate the circumstances around last year’s annual shareholder meeting, where chief executive Nobuaki Kurumatani only narrowly survived an approval vote.
Although Toshiba has said it will hold the EGMs as a combined event before the end of April, Effissimo last week raised the stakes by filing a petition at the Tokyo District Court asking for approval to call the EGM itself. This is a right it has under Japanese law and raises the pressure on Toshiba to hold the EGM more quickly.
Toshiba’s readmission to the top tier of the Tokyo exchange from January 29 follows an intensely challenging period for the company that began with the exposure of a huge profit-padding scandal in 2015.
The company was given a record fine and was later plunged into a further crisis by the failure of its US nuclear business. It ended its financial year in March 2017 with more debts than assets and the stock exchange demotion was an automatic punishment.
At the time, many investors and analysts judged the situation bad enough to warrant a full delisting. The decision not to do so was widely interpreted as a sign of tacit government support for the company.
Toshiba’s efforts to fill the financial hole left by the failure of the nuclear business involved the sale of a number of assets from what remains, even now, a sprawling portfolio of subsidiaries.
The largest sale was of its crown jewel memory chip business to a consortium led by Bain Capital. Other measures included a $5.4bn issuance of new shares, a move that put a large number of foreign and activist funds on its shareholder register.
In a written statement, Toshiba said that it had reformed its governance and internal control systems and made efforts to “transform the corporate culture”.