Toshiba removed from watchlist at Tokyo stock exchange

[TOKYO] The Tokyo stock exchange said it removed Toshiba Corp from its watchlist for delisting after seeing better internal controls and efforts to improve corporate governance.

Toshiba has made progress with its bookkeeping since an accounting scandal in 2015, and the disclosure of multibillion-dollar losses in its nuclear business in December, the exchange said in a statement on Wednesday.

The company still has negative shareholders equity and could be delisted if it is not able to meet listing requirements, the exchange said.

Toshiba signed an agreement on Sept 28 to sell its flash memory chip business to a group led by Bain Capital for about 2 trillion yen (S$24 billion), in an effort to reach positive shareholder equity.

Toshiba, which was was demoted to the second section of the exchange in August, needs to complete the deal by March. While the exchange's decision on Wednesday was mainly due to improved controls and efforts to bolster corporate governance, it's also a sign that financial authorities expect the Tokyo-based company's balance sheet to recover.

The Bain consortium includes major technology players Apple Inc, Dell Inc, SK Hynix Inc and Japan's Hoya Corp, while Toshiba itself will maintain a stake, the company said when it announced the memory chip deal.

The total value of the transaction may change depending on capital expenditures. The deal is aimed at keeping control of an important business in Japan, while securing the funding needed to help Toshiba repair its damaged balance sheet. Toshiba expects the deal to close by March 31.

Separately, earlier on Wednesday proxy advisers Glass Lewis & Co and Institutional Shareholder Services Inc called Toshiba's governance into question and recommended that investors vote against approving earnings results at the shareholders meeting later this month.

The company hasn't been able to secure an unqualified endorsement from its auditor, the two US firms said in separate reports, and recommended voting against President Satoshi Tsunakawa's re-nomination to the board.

BLOOMBERG