Scandal-hit Olympus Corp shares were untraded with a glut of buy orders on Monday after a source familiar with the case said it may be hit with only a fine for false financial reports, a move which could prevent a delisting.
Japan's securities watchdog may also propose seeking criminal charges against the individuals behind dubious M&A deals in one of corporate Japan's biggest governance scandals, the source said on Sunday.
Investors are keen to avoid a delisting of the company, whose lucrative business in diagnostic endoscopes, where it enjoys a dominant global market share of 70 percent or more, remains strong.
Orders for Olympus shares were indicated at 540 yen, up by its daily limit of 80 yen, a rise of 17 percent from Friday's close. The stock is now worth less than one-fifth of it value before the scandal broke.
Market sources warned, however, that the buy orders were probably driven by speculators.
If any investors are buying today because weekend media reports suggest Olympus might remain listed, that relief is premature and speculative at this point, said Masayoshi Okamoto, head of dealing at Jujiya Securities.
(T)here is a real possibility that Olympus could be bought, because its assets have value. But any potential buyer would have to wait until the company sorts out its problems, and it is unclear if its shares will remain listed or not.
Authorities are investigating Olympus after the company admitted it hid investment losses for decades using funds from M&A payments. Media reports on Saturday said police and regulators were joining forces in a rare collaborative effort to examine the cover-up.
The Tokyo stock exchange placed the stock on its supervisory post last week and warned it could be delisted if it fails to report earnings by December 14.
David Herro, chief investment officer for Harris Associates, Olympus's fourth-largest investor with a 4 percent stake, on Friday called for replacing Olympus's board.
We believe Olympus needs to bring in new management to build stakeholder confidence and to make sure reforms are made, he said in a statement issued on Friday.
The existing top management lacks stakeholder confidence in its ability to make reforms.
Olympus former Chairman and President Tsuyoshi Kikukawa has quit over the scandal and two other senior officials have either been fired or offered to resign over the scandal.
Herro's comments also highlighted investor interest in preventing the governance scandal from undermining Olympus's endoscope business.
While Olympus has serious problems with corporate governance, it remains a business with strong cash flows and good future prospects, he said.
(Reporting by Mari Saito and Lisa Twaronite; Writing by Edmund Klamann; Editing by Edwina Gibbs)