Japan's scandal-ridden Olympus Corp restated some of its crooked accounts on Wednesday, revealing that a 13-year accounting fraud had put a dent in its balance sheet, but the result defied investors' worst fears.
The maker of cameras and medical equipment risks delisting from the Tokyo Stock Exchange, and jeopardising its chances of surviving one of Japan's worst corporate scandals, if it is shown to have deceived investors as to its very solvency.
But restated accounts for the five years to 2009/10, lodged with the exchange two months after Olympus' sacked CEO blew the whistle on its dubious book-keeping, show that at no stage in that period did the true financial position of the firm sink into technical insolvency, where liabilities exceeded assets.
The most recent restatement, for end-March 2010, showed a 54 billion yen (447 million pound) reduction in Olympus' net assets, a large but not life-threatening dent for Olympus whose crashed-out market value is still worth almost seven times that amount.
Investors, however, remained on tenterhooks for further restatements from Olympus for the most recent full year, the 12 months to March 2011, and also its second-quarter results to end-September which could still show nasty surprises.
The stock, which has lost about half its value since the scandal broke in October, was down 5 percent in anticipation of these final statements due later in the day.
The restated accounts also came with qualified opinions from auditors, with an earlier newspaper report suggesting that the auditors had been unable to confirm all money flows.
Olympus faces automatic delisting if it fails to release the second quarter earnings by the end of day, a sanction that would cut it off from equity capital markets and put it under pressure to sell core assets.
The exchange can still delist the shares even if the deadline is met, depending on the scope of the misreporting.
A delisting would also mark a humiliating low for the firm which on October 14 triggered the crisis by sacking its British CEO, Michael Woodford.
Woodford immediately blew the whistle on the firm's accounting problems after he was fired and is now waging a campaign to be reinstated, appealing to shareholders to support his comeback as part of a complete renewal of the board.
The board has committed to resigning over the scandal, but wants to choose its own successors before quitting, setting up the prospect of a proxy war between its own candidates and those being assembled by Woodford as part of his campaign.
The shareholding balance is such that there is a realistic chance we could win a proxy fight, Woodford said. But he added that such a battle would cause a split between foreign and Japanese shareholders and that he hoped it could be avoided.
Some big foreign shareholders back Woodford's bid but Japanese institutional investors, although reticent, appear worried about whether he can win over the company's employees as well as his plans to turn around the once-proud firm.
Woodford said he was willing to meet Olympus President Shuichi Takayama at any time but added incumbent directors were too discredited to be in a position to choose their successors.
Woodford, who was a rare foreign CEO in Japan, also sought to soothe concerns about his plans to restore trust in Olympus.
I want no part in selling Olympus or breaking it up, he said, adding he would not close down the firm's struggling camera business.
People say the 'gaijin' president would shut it, Woodford said, using the Japanese word for foreigner. I wouldn't.
Analysts have said Olympus' big and profitable medical business could be bought by a rival or private equity if it became clear the firm could no longer effectively run it.
(Additional reporting by Chikafumi Hodo and James Topham; Editing by Mark Bendeich)