By Gina Lee
Investing.com – Japan’s Toshiba Corp. (T:6502) saw its shares surge to their highest level in three years after the company revealed plans to return to the TSE-1, or first, section of the Tokyo and Nagoya stock exchanges after an extended absence.
The company's shares soared 16.77% to JPY3,460 ($33.34) as of 12:17 AM ET (5:17 AM GMT), the biggest intraday gain since July 2017.
Toshiba has reportedly set the move date for Jan.29, in turn meaning that its shares will be added to market indexes and enabling domestic active funds to buy the stock. Jefferies (NYSE:JEF) senior analyst Atul Goyal also described the move as “inexpensive” in a report.
Toshiba was relegated to the second section of the two Japanese exchanges in August 2017, and narrowly avoided an outright delisting. It saw multibillion-dollar losses at the Westinghouse U.S. nuclear unit, which pushed liabilities beyond its level of assets and forced the sale of the semiconductor business. The company was also forced to take an infusion of cash from a sizeable contingent of activist shareholders, and the write-downs as well as accounting scandals saw outsider Nobuaki Kurumatani appointed as CEO.
The return to TSE-1 will enable Toshiba to rejoin the Topix index at the market close on Feb. 25, special-situations analyst Travis Lundy told Bloomberg. Lundy also estimated that the inclusion will require passive funds to buy 58 million shares, or 13% of outstanding stock.
“A Topix inclusion of this size is a rare species … long-suffering activists may rejoice. This creates liquidity for a partial exit,” he added in a report.
The move also comes after Kurumatani signaled Toshiba is ready to again pursue acquisitions and business expansion, albeit in a more circumspect and cautious manner than previously, in December. He also reaffirmed Toshiba’s intent of divesting its stake in former flash memory unit Kioxia.
“One thing that changed is that I’m in charge now … the board is also applying very stringent standards to acquisitions. It’s a completely different company when it comes to the rigor brought to thinking about and screening deals,” Kurumatani told Bloomberg.