Nidec Faces Delisting Risk as Tokyo Exchange Ramps Up Scrutiny

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(Bloomberg) — Nidec Corp., already mired in a deepening accounting crisis, now faces the risk of being deslisted after the Tokyo Stock Exchange said it will apply special oversight to the company.

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The manufacturer of precision motors has been designated as a ‘security on special alert’, starting Tuesday, the TSE said in a statement. That kicks off a potentially years-long process in which Nidec must show an internal management system that’s adequately developed and implemented. If the exchange sees no improvement after follow-up periods, the firm may be delisted.

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Nidec was thrown into crisis last month, when it announced it had found evidence that senior executives may have been involved in a number of accounting issues at subsidiaries. The company has an external committee investigating the cases after an internal probe of a payment of approximately ¥200 million ($1.3 million) by Nidec Techno Motor in Zhejiang raised red flags.

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Its turmoil deepened last week when it withdrew its annual profit guidance, and canceled its share buyback program. It also said it won’t be paying an interim dividend for the fiscal year ending March 2026, its first suspension of a midterm payout in at least a quarter century.

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Share Slump

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The move by the exchange may deal another blow to Nidec’s shares, which have tumbled roughly 20% since the start of September as its accounting issues came to light.

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“If any issues that warrant delisting are found, there is a possibility that the company will be delisted,” said Yugo Tsuboi, chief strategist at Daiwa Securities Co. The designation “indicates that some kind of problem has occurred, and the market may start to price in the risk of delisting,” he said.

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Nidec said that it will fully co-operate to ensure the third-party committee’s investigation concludes promptly and will formulate and implement a companywide improvement plan. The company apologized for the inconvenience and concern the events have caused for stakeholders.

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Still, it would be extraordinary for a company of Nidec’s size to be delisted and the exchange’s process can span years, giving the firm ample runway to improve its oversight. Major Japanese brand Olympus Corp., which was also placed on alert after an accounting scandal was exposed in 2011, has remained listed after improving its corporate governance.

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Fundamental Change

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“The company will need to carry out a fundamental overhaul of its internal accounting controls to address regulators’ concerns,” Bloomberg Intelligence analysts Masahiro Wakasugi and Takumi Okano wrote in a note. “If Nidec’s accounting reforms proceed smoothly, the designation could eventually be lifted — as was the case with Olympus in the past.”

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Nidec is one of Japan’s most acquisitive manufacturers but the recent turmoil has raised questions about whether decades of rapid expansion under its founder came at the cost of oversight and internal controls.