Nidec Plunges 22% on Accounting Scandal Fears, Marking Worst Drop on Record

TradingKey - Nidec, Japan's precision motor manufacturing giant, saw its shares experience the most severe single-day plunge in recorded history on Thursday, tumbling over 22% to close at 2,420 yen — a 700-yen drop from the previous trading day. The stock collapse stemmed from widespread market concerns over potential accounting irregularities, triggering massive investor sell-offs.

The company announced it has established a third-party committee to investigate accounting irregularities across its group companies. Previously, an internal investigation revealed that payment issues involving approximately 200 million yen (about $1.4 million) at Nidec Techno Motor in Zhejiang may involve risk asset write-down operations with management awareness.

“The investigations found multiple documents suggesting that, in addition to Techno, the Company and its group companies could have engaged in improper accounting with the involvement or knowledge of its or their management,” Nidec said.

“The veracity of the matter is unclear but if there were indeed improper accounting practices, the size of the impact is opaque, which would be a negative surprise,” Citigroup analyst Takayuki Naito wrote in a note. “The shares are likely to find upside hard work until the results of the third-party committee’s investigation are released.”

"Looking at today's stock price reaction, I think concerns about Nidec's management and internal controls are surfacing again," said Ryousuke Kiyota, senior analyst at Tokai Tokyo Intelligence Laboratory.

Nidec has previously postponed financial report releases twice. First, it delayed the submission of its securities report for the fiscal year ended March, which had claimed 11% sales growth and 48% operating income growth. Then it postponed the final earnings release for the quarter ended June, despite preliminary operating profit data exceeding expectations.

The company explained that due to country-of-origin declaration errors and unpaid import duties at its Italian subsidiary, the aforementioned results (including forecasts of stagnant growth for the current fiscal year) were not approved by auditors, indicating a crisis in the credibility of its financial data.

As the world's largest manufacturer of miniature motors, its core business has long been weighed down by weak demand for home appliance, personal computer, and automotive motors. Since its 81-year-old founder Shigenobu Nagamori stepped down as CEO last year, the company has been attempting to shift toward higher-margin growth areas through a series of acquisition strategies.