GPIF seeks $8.6mn in damages from Toshiba for stock losses

Beijing / Bloomberg

Japan’s $1.3 trillion Government Pension Investment Fund (GPIF) is suing Toshiba Corp. for losses on its investments after an accounting scandal sent the conglomerate’s shares plunging.
GPIF is seeking damages of about 900 million yen ($8.6 million), said Shinichirou Mori, a spokesman for the fund. The losses relate to shares bought by GPIF’s external fund managers in 2009 through a secondary share offering, he said. The Wall Street Journal reported the news earlier on Thursday.
“We bought the shares seven years ago and that’s how much we’ve calculated our losses on those holdings to be,” Mori said on the phone on Thursday. GPIF has previously sued other companies including Seibu Railway Co. and Livedoor Inc., he said.
Toshiba has been plagued by record losses and executive resignations after unveiling years of padded profits at the conglomerate, which makes everything from computers to nuclear power equipment. Shares have tumbled more than 40 percent since April 2015, when it withdrew its earnings forecast and announced an accounting probe that was later expanded.
GPIF has sought to bolster its stewardship of the nation’s pension savings amid a broader push by Prime Minister Shinzo Abe to make investors more engaged with the companies that they invest in. The country introduced guidelines for shareholders in 2014, which GPIF has pledged to follow, and started a corporate governance code last year.

Pressure Others
“Having such a big presence behind this lawsuit is going to pressure others to follow, and also make company executives more aware of governance at their firms,” said Takashi Aoki, a fund manager at Mizuho Asset Management Co. “It’s also going to put off other institutional investors from buying Toshiba shares.”
Japan Trustee Services Bank Ltd., which holds the Toshiba stock on behalf of GPIF, filed the suit at the Tokyo District Court on May 6, Mori said. JTSB representatives attended the first hearing at the court on Tuesday, he said. Toshiba spokeswoman Yuu Takase confirmed that JTSB filed the suit and declined to comment further as the case is pending.
In 2005, GPIF sued Seibu Railway after shares slumped following revelations it falsified financial statements. The fund sought 18.5 billion yen in damages and won 14.2 billion yen in July last year, Mori said. The retirement manager also filed a suit against Livedoor in December 2006 and won 4.4 billion yen in March 2012, he said.
Toshiba’s President Warns of Long Road to Recovery
Toshiba Corp. President Satoshi Tsunakawa, a day after stepping into his new role, cautioned that the company is still recovering from a bruising accounting scandal and faces a lengthy turnaround process.
“We are not even at the halfway point yet,” Tsunakawa said in a group interview in Tokyo on Thursday. “We are still at the mountain’s foothills.”
The Japanese power-to-electronics conglomerate revealed in 2015 its executives had padded profits for years. The scandal claimed the jobs of three presidents, led to record losses and forced it to shrink its empire. While managers at divisions from computers to power plants were found to have overstated profits or delayed booking losses, the medical unit led by Tsunakawa for four years till 2014 was spared controversy.
Tsunakawa now has to win back investor confidence after a 51 percent plunge in share price last year. Shareholders this week approved his promotion from senior vice president, replacing Masashi Muromachi, who took over as president temporarily in July.
He said his immediate goals were to improve Toshiba’s finances, win back shareholder trust and get the company off a Tokyo Stock Exchange list of securities under supervision. He aims to increase its shareholder-equity ratio from about 6.1 percent now to more than 10 percent by fiscal 2018.
Toshiba is predicting a return to profit this fiscal year after narrowing the scope of its businesses. The Tokyo-based company agreed to sell its medical unit to Canon Inc. and home-appliance division to China’s Midea Group Co.
Shares of Toshiba have climbed 16 percent this year to close at 290.7 yen in Tokyo on Thursday. They’re still down about 40 percent since May 2015, when it withdrew its earnings forecast and announced the accounting probe.