More than 35 global hedge funds have put a bet of $5.4 billion on Toshiba’s re-emergence. This is a sign of assurance that the conglomerate will register a higher profit next year. The bet was engineered so that foreign investors will see a profit in the future even if Toshiba’s memory chip business falls through.
Toshiba has been on a downward slope ever since it lost billions of dollars in liabilities at its bankrupt US nuclear reactor in Westinghouse. The company will either try to cover the difference by the end of the financial year in March or face delisting.
The investment came from various hedge funds including Elliott, Farallon, and Effisimo. The last one is a Singapore-based fund founded by Japan’s most famous activist investor, Yoshiaki Murakami. The firms will buy $5.4 billion worth of newly issued Toshiba shares.
The deal was proposed by Goldman Sachs at a board meeting on Sunday and it is equivalent to a 35 percent stake in the Japanese conglomerate.
This cash injection is Toshiba’s latest move in keeping afloat amid its crippling financial situation. The company sold its memory chip business in September to a private equity firm, Bain Capital, which is financially backed by Apple, Dell, and other US and Japanese conglomerates. If Toshiba manages to pull through with the deal, they will still owe 40 percent in the microchip business.
An anonymous investor who participated in the share sale stated the $5.4 investment is a surefire way of registering a profit for investors in the future.
“Either after March you have a company with a 40 percent stake in Toshiba Memory and a lot of cash in hand, or you have a company that continues to own a great business,” he said.
Toshiba’s latest financial losses forced them to report a negative net worth for the last fiscal year.
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