Shares in Olympus Corp rose by the maximum allowed on Monday on signs the scandal-hit maker of cameras and endoscopes may escape having its shares de-listed.
A source familiar with the case said on Sunday that Japan's securities watchdog may only recommend a fine against the company, while proposing criminal charges be sought against the individuals behind dubious M&A deals used to cover up its massive investment losses.
But Olympus's bankers, who will meet company executives on Wednesday, warned they would take action if the company was found to have used loans for other than their agreed purpose.
Investors are keen to ensure that Olympus, caught up in one of corporate Japan's largest governance scandals, can continue operating its lucrative diagnostic endoscope business, which has a 70 percent share of the global market. That business makes about 70 billion yen ($900 million) in operating profit, with profit margins of 19 percent.
Olympus's shares settled at 540 yen on Monday, up by the most allowed for one day, and up 17 percent from Friday's close. The stock, which had lost more than four-fifths of its value since the scandal broke, was untraded as buy orders overwhelmed offers to sell.
But there were warnings 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.
Okamoto said there was a real chance 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's unclear if its shares will remain listed or not.
Authorities are investigating Olympus after it admitted hiding 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.
Sumitomo Mitsui Financial Group, Olympus's largest lender, said on Monday it would consider support for the troubled firm after seeing a report by a third-party panel set up to examine the questionable M&A deals. That report is due early next month.
But another creditor, Mizuho Financial Group Inc, said action must be taken if loan funds are shown to have been misappropriated. The bank said it lowered its internal credit status for Olympus in the wake of the scandal.
The other two top banks, SMFG and Mitsubishi UFJ Financial Group, declined to say if they took similar action.
The Tokyo Stock Exchange placed Olympus shares on its supervisory post last week, and warned the stock could be de-listed if it fails to report earnings by December 14.
CHANGE THE BOARD
David Herro, chief investment officer for Harris Associates, Olympus's fourth-largest investor with a 4 percent stake, has called for the Olympus board to be replaced.
We believe Olympus needs to bring in new management to build stakeholder confidence and 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's former Chairman and President Tsuyoshi Kikukawa has quit over the scandal and two other senior officials have either been fired or offered to resign.
Herro's comments also highlighted investor interest in preventing the 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.