A great share collapse of Nisan Corporation (which is a subsidiary company of Renault Automobile Concern) occurred at the close of the Tokyo stock exchange on November 20.
At the close of trading, the securities of Nissan have crashed by 5.4% in one hour, reaching the level of JPY 950.7, which has been the lowest value for 2.5 years. Following the shares of Nissan Corporation, the shares of Mitsubishi associated company have declined by 6.85%. And the securities of Renault have fallen in price on the European markets by more than 13% on Monday.
The trigger for such a huge collapse of securities was the arrest of Mr. Carlos Ghosn, who had been heading the alliance consisting of all three companies.
Mr. Carlos Ghosn was arrested on November 19, after the internal investigation performed inside Nissan Corporation. The investigation revealed that Mr. Carlos Ghosn had committed a number of violations, including jobbery.
In particular, he is charged with the tax evasion (the understated income amount is around 44 million US dollars) and with the use of the corporate assets to his personal advantage. On top of that, he is also charged with the deliberate understatement of the company’s expenditures in the financial statements, thereby increasing the amount of his own compensation.
Today, Mr. Carlos Ghosn serves as a head of the executive board of the Japanese companies and also serves as an executive director in France. The representatives of the Japanese companies reported that they would be obliged to suspend this top-manager from his duties. At the same time, the representatives of the French company still refuse to give any comments.
Interesting fact: it is exactly Mr. Carlos Ghosn, who is a “father” of the financial recovery of the concern. In the year 1996, he became a top-manager of the loss-making Renault Company. It took his three years to cut all main, thus putting the company into a profitable trend.
In the year 1999, he supported the initiative to join with Nissan. Later, Mitsubishi Company also joined the alliance. Mr. Carlos Ghosn was hatching a plan to unite all three companies in one huge carmaker that would become the world’s largest concern in the nearest future.
The negotiations about the full consolidation have been carried out since 2017, but now they will definitely be in suspense. Moreover, the arrest of the alliance’s main ideologist now throws into question its further existence.
The alliance’s problems will also have some indirect influence on another large company, purchased by the French concern for over a decade. The Russian AvtoVAZ company has recently very serious financial problems. The company’s shares traded at MOEX are now considered to be high-risk shares.
Even though, the factory’s cars are manufactured on the Renault platform, the factory itself has pretty uncertain prospects. And nobody can make any forecasts regarding this factory’s future in case of the collapse of the alliance. So far, the arrest of Mr. Carlos Ghosn had no affect on the securities’ quotes.
Despite the fact that this situation came as a surprise for, not many investors of them are going to sell their shares. Those, who missed to get rid of shares today, recommend not panicking. Much will depend on how far this top-manager got taking personal advantages of his head position in the alliance, but this will be known only after some time.
Another thing that may stabilize the situation is the appointment of a new head, which will support the current development course. So it is too early to abandon any investment ideas connected to the Japanese car industry. It makes sense to wait for the completion of the drawdown and buy securities at the bottom.