Olympus saga to have far-reaching consequences in Japan
From a mere possibility to a real threat.
The delisting of Olympus shares is becoming the most likely outcome of the saga that has both engulfed and bamboozled corporate Japan and its watchers.
The company now says that it will not be able to meet the 14 November deadline for submitting a mandatory quarterly earnings report - so it has been granted an additional month to do so.
The delay hardly comes as a surprise, given that just earlier this week it admitted to using funds from mergers and acquisitions to cover losses for more than 20 years.
The problem is not that it has admitted these practices, but the fact that the firm has not given any further information about the losses.
No-one outside the company knows for sure how much money it lost and for how long.
Olympus has been given a new deadline of 14 December by the Tokyo Stock Exchange (TSE) to submit the earnings report, but it is highly unlikely that it will be able to meet even that deadline either.
"It will take time to find out what has been going on in the company," says Yuuki Sakurai of Fukuko Capital Management.
"All the previous transactions that have been brought to light will have to be properly clarified and accounted for. There is a big doubt that any accounting firm will give an OK to the balance sheet."
Bad to worse
A failure to meet the new 14 December deadline will have potentially disastrous consequences for the Japanese camera and medical equipment maker and its shareholders.
The TSE has warned in no uncertain words that Olympus shares will be delisted from the stock exchange, which essentially means that shareholders risk seeing their investments being wiped out.
Its shares have already lost about two thirds of their value since the scandal first broke on 14 October.
On Thursday, Olympus shares were untraded for the better part of the morning due to a glut of sell orders. Coming sessions are unlikely to be any different.
As for the company, analysts say delisting will make life for Olympus extremely difficult as well.
"The markets will lose all faith in them and even ordinary business transactions could be affected," says Mr Sakurai.
Mr Sakurai warns that Olympus may find it hard to raise cash from the market given the recent developments and disclosures about malpractices.
"At this moment, it is very difficult to see any bank lending them money unless they actually know what was going on in the company, but I doubt anybody knows that," he says.
The biggest threat, according to analysts, is the company going bankrupt.
Fortunately for Olympus and its shareholders, amid all these dark clouds there may be a glimmer of hope, not least because of the company's dominance of the medical equipment sector.
Olympus has an almost 70% share of the global endoscope market, a fact that analysts say cannot be ignored.
"I have to say that the underlying business is a very solid one," says Gerhard Fasol, of Eurotechnology Japan.
Mr Fasol explains that given its large market share, Olympus' medical equipment unit should have good profit margins, which may help it ease any cash flow issues.
"The banks and the community in Japan are very well aware of that. They will treat it like a diamond in a crooked ring," he says.
However, Mr Fasol adds that Olympus needs to find a way to separate its medical equipment arm from other businesses as soon as possible in order to cushion the impact of a possible delisting.
No matter how things unfold for Olympus over the next few weeks, one thing is certain. These developments are likely to have a big impact on corporate governance in Japan.
"Olympus' matter will have quite large repercussions - far beyond the firm itself," says Mr Fasol of Eurotechnology Japan.
Questions are already being asked about how the accounting firms and auditors who approved Olympus' balance sheets all these years, missed out on these transactions.
Along with the financial regulators, there are reports that the Tokyo Metropolitan Police is also investigating the matter, raising suspicion about criminal activities.
"Repercussions could be on legislation in Japan, on corporate governance in Japan, and also on the accounting profession... even on the way accounting supervision is regulated," Mr Fasol adds.
The investigations are likely to take some time as documents and evidence going back almost two decades will have to be scanned and investigated to find out the real extent of the losses and the cover-up.
However, given the high-profile nature of the scandal and the attention that it has received, Olympus will find it hard to hide the facts any longer.
"I think we can be quite certain, that the truth will come out," says Mr Fasol.