TOKYO - A perennial money-losing company that faces possible bankruptcy gets a fresh line of credit from its banks, plus solid promises from its larger partners that they will assist in its restructuring. So does a relieved stock market bid up the company's share price?
The shares of Nissan Diesel Motor Co. jumped 5 percent, to ¥107 or about $1, on Feb. 7, when the company announced a major bailout plan involving its two biggest shareholders, Nissan Motor Co. and Renault SA. Each company owns 22.5 percent of the troubled truckmaker.
Since then, however, the shares have nose-dived 20 percent. The stock closed at ¥85 on Thursday, Feb. 17. Traditionally, any price below ¥100 on the Tokyo Stock Exchange is considered a no-confidence vote by the market. Nissan Diesel's historic low stock price is ¥69, set back in 1962.
There are two reasons for the pummeling the stock has taken, said Chikao Masuzawa, truck analyst at ING Baring Securities (Japan) Ltd.
'The basic reason is that the truck market in Japan is not showing any signs of recovery at all,' she said.
Sales of medium- and heavy-duty trucks closely mirror economic activity, and the Japanese economy is on the edge of recession.
In addition, investors 'have to get rid of some holdings to raise money to invest in better-performing companies,' Masuzawa said. 'So they're switching off.'
As they choose which stocks to sell in order to raise funds, 'investors are trying to minimize risk,' she added. 'Everyone is looking at what happened to Nagasakiya.'
Nagasakiya is a chain-store retailer. It filed for court protection from its creditors on Feb. 13 with group liabilities of about $3.5 billion, making it the largest retail bankruptcy in Japanese history.
'In Nissan Diesel's case, you never know what's going to happen,' Masuzawa cautioned. On the other hand, she added, 'If there's any sign of improvement in the industry, Nissan Diesel's share price is going to bounce back quickly.'