For how long can a company hide investment losses ? For 2 years, or maybe 4 years? How about more than 30 years? The senior management of Olympus Corp. , a Japanese manufacturer of high-tech machinery and instruments, announced that it covered up investment losses dating back to the 1980s. Apparently the blame had to fall on the former Presindent and chairman Tsuyoshi Kikukawa (who quit on the 26th of October), on the Vice-President Hisashi Mori and the internal auditor Hideo Yamada, but considering the sheer size of the company it is impossible to say that they were the only people familiarized with the cover-up.
As a result, Olympus shares, which are a part of the Japanese stock market index Nikkei, have reached the limit-down loss of -29% on Tuesday and are now less at a more than 70% loss since news of the cover-up eeked out. There are talks of delisting the company from the stock market and Ben Collet, head of Japanese equities at Louis Capital in Hong Kong puts the odds at 20%-30%.
The method of covering-up investment losses was by posting a massive advisory fee involved in Olympus’ takeover of a British company amounting to $687 million out of an estimated $2.2 milion takeover. The huge fees, alegedly, were accounted to the two advisory companies involved in the takeover: Axes America LLC and AXAM Investments Ltd.
Olympus is a 92 year old company, founded in 1912 as a manufacturer of microscopes. It diversified its portfolio into new markets in 1930 when it started producing cameras and in the 1950s when it developed endoscopes, or gastrocameras. The latter became its business pillar as Olympus currently accounts for 70% of the global market of endoscopes.