TOKYO—Shares of Olympus Corp. fell as much as 24% Monday morning as an abrupt ouster of its foreign chief executive clouded prospects for the Japanese company’s earnings and triggered an immediate string of brokerage downgrades.
The heavy selloff sent the stock to the lowest level since May 2009, as both foreign and domestic investors winced at the growing uncertainty, stoked by fresh questions raised by the ousted executive Michael Woodford about the company’s governance practices.
In a weekend interview with The Wall Street Journal, Mr. Woodford said he sent a letter to the imaging-equipment’s chairman raising questions about the prices and advisory fees paid in a series of acquisitions in the years before he joined Olympus’s board.
Olympus, which makes cameras and medical equipment, said Friday it fired 51-year-old Mr. Woodford, the company’s first non-Japanese chief executive, due to a clash in management style with other senior executives.
«If it’s just a CEO resignation, we can expect a rebound in shares. But it’s difficult to invest in this stock now since we don’t know what’s going to come out from here,» Monex Inc. senior market analyst Toshiyuki Kanayama said.
Nomura Securities lowered its rating on the stock to Neutral from Buy and slashed its target price to ¥2,000 ($26) from ¥3,300, saying Chairman Tsuyoshi Kikukawa, who took over as president, is unlikely able to push through cost-cutting measures that he couldn’t deliver over the past decade.
«With the firing of Mr. Woodford, who had been a strong proponent of cost cutting, we no longer have any expectations of earnings improvement resulting from bold cost reductions in FY 2012 onward,» Nomura analyst Motoya Kohtani wrote in a client note.
JPMorgan Securities immediately cut its operating profit forecast for the fiscal year ending March 2013 to ¥60 billion from ¥70 billion, also citing cost-cutting uncertainties and the risk of intensified competition in the mirrorless camera market. House lowered its rating to Neutral from Overweight.
Olympus shares extended Friday’s 18% drop and briefly went limit-down to ¥1,545. At 0130 GMT, shares were down 23% at ¥1,575.
Source: /online.wsj.com