TOKYO— Toshiba Corp. shares fell more than 20% on Wednesday, the maximum allowed for the day, after a warning about a multibillion-dollar write-down caused investors to flee.
That followed a 12% decline on Tuesday after initial reports of the write-down. A news conference Tuesday evening by Toshiba executives exacerbated investor fears because it left open the possibility that the company's net worth could turn negative.
Toshiba said the problem stemmed from cost overruns at its U.S. nuclear subsidiary, Westinghouse Electric Co., which is building several reactors including two for power utility Southern Co.
Westinghouse had been working on that project with CB&I Stone & Webster Inc., a U.S. company that it acquired about a year ago. Toshiba said it discovered unexpected inefficiencies in the labor force at the newly acquired subsidiary that along with other factors were driving up costs. Toshiba Chief Executive Satoshi Tsunakawa said the problems would force the company to take a write-down estimated at several hundred billion yen, or several billion dollars.
The company said it would release the exact figure in February.
"It's an unexpected development at a time when concerns had been receding," said Yoshinori Ogawa, strategist at Okasan Securities. Toshiba shares had surged since February on optimism about its semiconductor business and expectations for solid net profit in the current fiscal year ending March 2017.
Toshiba shares fell 80 yen on Wednesday—the maximum drop for one day under stock-exchange rules—to ¥311.6. A Toshiba spokesman declined to comment on the stock-price move.
Tuesday's news brings the focus back to Toshiba's shaky balance sheet, which took a big hit last fiscal year when the company acknowledged it had improperly padded its results for years. Top management was replaced after the accounting scandal.
As of Sept. 30, the company had ¥363 billion ($ 3.1 billion) in capital, representing just 7.5% of assets—a thin cushion against sudden shocks. If the write-down is in the higher range of estimates, it could wipe out Toshiba's capital and leave it with negative net worth.
Asked at the news conference about the possibility of falling into negative net worth, Toshiba executives declined to rule it out.
Toshiba is already on a Tokyo Stock Exchange watch list because of the accounting scandal. That makes it difficult to raise funds by issuing new shares. Stock-exchange rules call for a company to be delisted if it falls into negative net worth at the end of its fiscal year and fails to repair the situation within a year.
Toshiba executives said they would ask the company's banks for support. Toshiba already sold one of its best-performing units, Toshiba Medical Systems, to Canon Inc. this year.
Naoki Fujiwara, fund manager at Shinkin Asset Management, said some investors had seen the nuclear business as a potential growth area because of demand in developing nations. "If you think more of this could happen in the future, it would be difficult to invest in the company over the mid to long term," he said.
— Takashi Mochizuki contributed to this article.
Write to Kosaku Narioka at kosaku.narioka@wsj.com
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