What's going on?

On Tuesday, Japanese electronics manufacturer Sharp � owned by Taiwan�s Foxconn � announced plans to buy Toshiba�s PC business, and to raise nearly $2 billion from investors.

What does this mean?

Foxconn caught Sharp�s falling knife back in 2016, and put a plan in place to turn around the company�s fortunes, returning it to profit. It achieved this recently, thanks to cost cutting (a.k.a. synergies).


Sharp�s only paying $35 million for Toshiba�s PC division, which sold just shy of 1.5 million computers last year, compared to almost 18 million in its heyday seven years ago (nowadays, customers prefer to buy laptops, tablets and mobiles). As part of major manufacturer, Foxconn, investors are hoping Sharp will be able to reduce the cost of making Toshiba�s computers, resulting in more price-competitive products.

Why should I care?

The bigger picture: Taking from Peter to pay Paul?

Sharp�s raising $1.8 billion by selling new shares in the company. It intends to use the money to buy back �preference shares� � these shares offer investors a fixed dividend that must be paid before ordinary shareholders can receive anything. They were given to banks that helped to bail out Sharp in its 2015 reorganization. Although selling new shares means current stockholders will own a lower proportion of the company than they did before (since there are new shares being added to the total), Sharp believes that if the preference shares were converted to ordinary ones, existing investors would own even less when the dust settles.

For markets: Toshiba�s selling and investors like it.

Toshiba�s stock rose by 1% on Tuesday following the news. Investors appear to like the company�s bid to streamline operations. Last week, Toshiba�s plan to sell its memory chips business for $18 billion received approval from Chinese regulators � the company said it plans to use the money raised to invest elsewhere in its business, but also to reward investors with share buybacks.