Toshiba Corp. lost access to one of its subsidiary’s funds after hedge fund Oasis Management went to court to get the unit to take back its cash from the struggling conglomerate.
Toshiba Plant Systems & Services Corp., which had 87.8 billion yen ($804m) parked at Toshiba at the end of last year, said it had terminated its deposit agreement and recalled the money by March 31, according to court documents obtained by Bloomberg. Hong Kong-based Oasis filed a provisional injunction against Toshiba Plant’s directors with the Yokohama District Court on March 9, asking them not to deposit funds with their parent firm.
The move is another blow for Toshiba, which is trying to sell its memory chip business to shore up finances hurt by losses at its Westinghouse nuclear operations. The company is facing the threat of delisting from the Tokyo Stock Exchange and has warned that its very survival is at risk. For Seth Fischer, chief investment officer at Oasis, Toshiba Plant’s decision is also a success in the battle to get Japanese companies to respect the rights of all stock owners.
“It’s a victory for us and for minority shareholders,” Hong Kong-based Fischer said in a phone interview. “They’ve had this cash there forever. You can keep the money at the bank. There’s no need to keep it at your parent company. But in Toshiba’s case, obviously there is the risk of bankruptcy. There are substantial internal control issues. Toshiba Plant is not getting paid enough for these risks.”
Toshiba Plant shares jumped as much as 7.8 percent in Friday trading in Tokyo, their steepest intraday gain since July 2015. Toshiba fell 4.6 percent.
“The shares are probably rising on relief after the company got money back from its crisis-stricken parent,” said Yoshinori Ogawa, a senior strategist as Okasan Securities. “There is the possibility that close to 90 billion yen in funds will be returned through a buyback or other form of shareholder payout.”
Masayuki Tamura, a spokesman for Toshiba Plant, declined to comment because the company is in a silent period ahead of reporting earnings. Motohiro Ajioka, a spokesman for Toshiba, declined to comment. Toshiba Plant disclosed the change in its cash management policy in a brief filed to the Yokohama court in response to Oasis’s injunction request. Oasis owns 4 percent of Toshiba Plant, making it the second-largest shareholder after Toshiba, which has a 52 percent stake, according to data compiled by Bloomberg. Oasis urged Toshiba Plant last year to invest its cash hoard or pay it back to investors, rather than letting most of the money sit with its parent.
Fischer, a well-known backer of Japan’s attempts to make companies use cash better and protect the rights of all shareholders, said in February that while Toshiba Plant’s money still sat with its parent, the subsidiary at least got a market rate.
