Stock in the troubled Japanese camera-maker Olympus surged almost 20 percent in Tuesday’s trading on Japan’s Nikkei Average after news the firm was planning to sue current and former executives implicated in a $1.7bn fraud.
The stock opened the day down almost 50 percent since the scandal broke in October last year. It ended the day up 19.94 percent, however the Wall Street Journal said the surge was down to the Tokyo Stock Exchange’s decision to give Olympus shares "alert" status, meaning the firm can avoid near-term delisting.
Its decision to sue 19 executives over one of Japan’s largest-ever corporate frauds may have reassured investors, but the lawsuit aims to recover only a tiny amount of the total that’s been wiped off Olympus’s books.
The lawsuit was announced on Sunday and will target former CEO Tsuyoshi Kikukawa, current President Shuichi Takayama and 17 other executives all of whom were party to a scheme that hid losses through exorbitant payments for fictitious financial services and dodgy offshore companies.
The manufacturer of cameras and medical devices has admitted to concealing losses dating back to the 1990s, reported the New York Times.
The fraud was made public by the former president of the company, Michael Woodford, who was ousted by the rest of the board when he went public about the company’s finances.
Six board members implicated in the fraud, including Takayama, will stay on until the next shareholder meeting, scheduled for March or April, Olympus said.
This leaves it in the extraordinary position of continuing with its most senior executive and five other directors who it is now suing for mismanagement, noted an analyst who spoke to Reuters.
"Essentially, everyone feels they are on death row. It does seem extremely strange to have the death row cell inside the company," said Nicholas Smith, head of Japanese equity strategy at CLSA in Tokyo. "Having nobody at the helm makes it easier for a takeover."
Olympus shares surged as much as 28 percent before falling back to close up 19.9 percent. The firm has lost half its market value since the scandal erupted in October.