What's going on?

Toshiba, one of Japan�s largest conglomerates, warned on Tuesday that it�s at risk of going bankrupt! To scrape up some cash, it�s planning to sell off its lucrative chip business, a move that�s not without some controversy�

What does this mean?

Tuesday�s storm of bad news for Toshiba started when the company released its earnings report for the past year: it reported a massive $9.1 billion loss because of a big markdown in the value of a company that a Toshiba subsidiary bought in 2016.


But that wasn�t all. Toshiba issued a warning that bankruptcy could be just around the corner (tweet this). Also, its accountants wouldn�t sign off on the accuracy of the report, which suggests that the losses might be even bigger.

Why should I care?

The bigger picture: Political concerns might hold up the sale of Toshiba�s chip-making division.

One piece of good news for Toshiba is that Foxconn, an electronics manufacturer based in Taiwan, has said that it�ll pay up to $27 billion for Toshiba�s chip business, according to The Wall Street Journal � which is about $10 billion more than Toshiba�s valuation of the division and would be a boon for the cash-strapped company. That deal, however, might get held up by Japanese regulators, who have vowed not to approve any sales that could put Japan�s national security at risk. They also might not be too keen to see a valuable branch of one of Japan�s largest tech companies fall into the hands of a Taiwanese manufacturer with ties to China.

For the stock: The value of Toshiba�s stock risks a wipeout.

Since the news concerning its US subsidiary surfaced back in December, Toshiba�s stock has lost nearly half of its value. Shareholders seem pretty worried by Toshiba�s grave warnings for its own future, and understandably so: typically, when a company goes bankrupt, its stock becomes near-worthless because the investors that have lent the company money (a.k.a. debtholders) take ownership of the company while shareholders lose out.