Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

On Friday, <a href="https://www.smartkarma.com/entities/637" target="_blank" data-smartkarma-citation="entities:637:1">Toshiba Corp (6502 JP)</a> officially <a href="http://www.toshiba.co.jp/about/ir/en/news/20170623_1.pdf" target="_blank">applied for</a> an extension to file its Annual Securities Report (yukashoken hokokusho (aka 'yuho' or 有価証券報告書)) and the FSA <a href="http://www.toshiba.co.jp/about/ir/en/news/20170623_3.pdf" target="_blank">granted</a> Toshiba's request, providing an extension to August 10th. The company also provided a <a href="http://www.toshiba.co.jp/about/ir/en/news/20170623_4.pdf" target="_blank">revision</a> to its estimated fiscal year numbers (clarifying its negative net shareholder capital position of -581.6bn yen, and negative net asset position -303.9bn yen) and also noted that its auditor agreed with the calculation of the company's negative equity and negative net worth position.The onset of a negative net net worth requires, by TSE listing rules (<a href="http://www.jpx.co.jp/english/rules-participants/rules/regulations/tvdivq0000001vyt-att/securities_listing_regulations_(r1-r826)_20161104.pdf" target="_blank">Securities Listing Regulations</a>, Rule 311, Paragraph 1, Item 5, Main Clause (p47)), a "reassignment" from the TSE First Section to the Second Section. This would normally require the TSE 'confirm' the negative net worth in the Yuho. That has been delayed, so today's confirmation by Toshiba was designed to allow the TSE to announce the reassignment despite the lack of yuho.<div class="content-highlight"><h2>The Upshot of the News of the Delay and Confirmation of Negative Net Worth</h2>The TSE has, after the close, announced the <a href="http://www.jpx.co.jp/english/news/1021/20170623-06.html" target="_blank">reassignment</a> of Toshiba to the TSE2 AND has announced the Entry into a Grace Period pertaining to Delisting (as per <a href="http://www.jpx.co.jp/english/rules-participants/rules/regulations/tvdivq0000001vyt-att/securities_listing_regulations_(r1-r826)_20161104.pdf" target="_blank">Securities Listing Regulations</a>, Rule 601, Paragraph 1, Item 5, Main Clause (p89)).According to the TSE <a href="http://www.jpx.co.jp/english/rules-participants/rules/regulations/tvdivq0000001vyt-att/securities_listing_regulations_enforcement_rules_(r1-r822)_20160603.pdf" target="_blank">Enforcement Rules for Listing Regulations</a> (Rule 311 p149) this means that as of the first business day of the 5th month following the end of the business year (i.e. August 1st), the stock will be reassigned. As discussed four months ago in <a href="https://www.smartkarma.com/insights/toshiba-possible-demotion-to-tse2-the-mechanics-impact" target="_blank" data-smartkarma-citation="insights:8838">Toshiba: Possible Demotion to TSE2? The Mechanics &amp; Impact</a>, this means that those shareholders who hold the shares BECAUSE the shares are in TSE1 will have to sell.Those shareholders who hold Toshiba shares in TOPIX Index-tracking funds or Nikkei 225 Average tracking funds will be obliged to sell, and the various index calculations will be based on the closing price on that day.How many shares have to be sold?    A lot. Figure 525+mm shares in total, conservatively.</div>More discussion of the mechanics, the derivation of the calculations, the historical precedents, and the implications below the fold.

On Friday, Toshiba Corp (6502 JP) officially applied for an extension to file its Annual Securities Report (yukashoken hokokusho (aka 'yuho' or 有価証券報告書)) and the FSA granted Toshiba's request, providing an extension to August 10th. The company also provided a revision to its estimated fiscal year numbers (clarifying its negative net shareholder capital position of -581.6bn yen, and negative net asset position -303.9bn yen) and also noted that its auditor agreed with the calculation of the company's negative equity and negative net worth position.The onset of a negative net net worth requires, by TSE listing rules (Securities Listing Regulations, Rule 311, Paragraph 1, Item 5, Main Clause (p47)), a "reassignment" from the TSE First Section to the Second Section. This would normally require the TSE 'confirm' the negative net worth in the Yuho. That has been delayed, so today's confirmation by Toshiba was designed to allow the TSE to announce the reassignment despite the lack of yuho.The Upshot of the News of the Delay and Confirmation of Negative Net WorthThe TSE has, after the close, announced the reassignment of Toshiba to the TSE2 AND has announced the Entry into a Grace Period pertaining to Delisting (as per Securities Listing Regulations, Rule 601, Paragraph 1, Item 5, Main Clause (p89)).According to the TSE Enforcement Rules for Listing Regulations (Rule 311 p149) this means that as of the first business day of the 5th month following the end of the business year (i.e. August 1st), the stock will be reassigned. As discussed four months ago in Toshiba: Possible Demotion to TSE2? The Mechanics &amp; Impact, this means that those shareholders who hold the shares BECAUSE the shares are in TSE1 will have to sell.Those shareholders who hold Toshiba shares in TOPIX Index-tracking funds or Nikkei 225 Average tracking funds will be obliged to sell, and the various index calculations will be based on the closing price on that day.How many shares have to be sold?    A lot. Figure 525+mm shares in total, conservatively.More discussion of the mechanics, the derivation of the calculations, the historical precedents, and the implications below the fold. 

Toshiba Demotion from TSE1 to TSE2; TOPIX Exclusion Jul31 Close

Japan

PIXELA CORPORATION develops and manufactures graphics software for image editing.  The Company also sales computer peripherals including storage devices, PC cards, and cables.

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Pixela Corp (6731 JP)

Toshiba Demotion from TSE1 to TSE2; TOPIX Exclusion Jul31 Close

On Friday, Toshiba Corp (6502 JP) officially applied for an extension to file its Annual Securities Report (yukashoken hokokusho (aka 'yuho' or...

Travis Lundy

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