Would You Own 6594 Nidec at 1,500 Yen per Share?

On October 27, the Tokyo Stock Exchange (TSE) designated the shares of Nidec (6594, Prime Market) as a "Special Caution Stock," effective October 28. This measure was taken in response to the "disclaimer of opinion" by the auditing firm (PwC Japan) regarding the company's securities report for the fiscal year ending March 2025. Nidec's stock tanked upon the revelation of this news.

Background

The background to the disclaimer of opinion involves suspicions of improper accounting practices related to trade transactions and tariffs at a Chinese subsidiary, and a third-party committee was established on September 3, 2025, to conduct an investigation.

As a result, the stock price hit its daily lower limit (down 19.4% from the previous day, at 2,070.5 yen) on the morning of October 28, and it will be removed from the Nikkei 225 index effective November 5 (to be replaced by 4062 Ibiden). The company has suspended its interim dividend payment and withdrawn its earnings forecast, significantly shaking market confidence.

I have previously discussed that Nidec's accounting scandal might resemble in severity and consequence that of Toshiba, which sold itself out to activists and then to a private equity fund after an accounting irregularity investigation.

But we also should consider the scenario where Nidec stops short of getting delisted. After all, Nidec is far from many of those typical small listed companies that commit serious accounting fraud and get delisted. Nidec is a global major company that has publicly declared the strengthening of internal controls, and if the third-party committee investigation is completed by spring 2026, there is a high possibility that it will end with minor corrections. The TSE also places emphasis on "prospects for improvement" and tends to respond flexibly with a one-year review.

Empirical Data

Here is an interesting and crucial data: Among designated companies after an audit opinion refusal, most - up to 90%, according to my independent estimate - have had the "Special Caution Stock" designation lifted due to system improvements.

Cases of delisting occur only when there are "ongoing deficiencies" in the internal system.

At 1,500 yen per share—a level that is another 500 yen (or 25%) down from the current level of 2,070 yen—Nidec's market cap is 1.85 trillion yen. With the projected net income of 0.2 trillion yen, that makes the company trade at only 9.26x PER.

On its latest available balance sheet (assuming we can believe the numbers there to a large extent), total debt almost equals the amount of current assets. So, on a back-of-the-envelope basis, we can treat Nidec as a net-debt-free company.

Let's look at comparable peers: 6503 Mitsubishi Electric and 6902 Denso. Mitsubishi Electric trades at 24.8x PER. Denso trades at 12.4x PER, each as of the time of this writing, which is 2:50 p.m., October 28, 2025 JST. Mitsubishi Electric has 1.5 trillion yen of net cash versus its market cap of 8.6 trillion yen.

Denso has 1 trillion yen of net cash versus 6.7 trillion yen of market cap.

So, on an apples-to-apples basis, the "cash-neutral" PER for Mitsubishi Electric and Denso would be 24.8x (1 - 1.5/8.6) = 20.5, and 12.4x (1 - 1/6.7) = 10.5, respectively.

*Cash neutral PER = PER x (1 - Net Cash Rate)

** Net Cash Rate = Net Cash / Market Cap

For reference, ABB Ltd (ABB.ST), a Swedish competitor to Nidec, trades at 30.77x PER.

End Note

It is still unclear what the fate of Nidec's public listing status will be. It might go the route of Toshiba (delisted) or the other way (remain listed). For whatever it's worth, my Grok analysis puts the odds of Nidec remaining listed at 70% to 80%. As noted earlier, among designated companies after an audit opinion refusal (e.g., multiple companies in 2023–2024), most have had the "Special Caution Stock" designation lifted due to internal improvements.

At what price Nidec's shares will trade tonight in the after hours market and tomorrow will be worth watching.

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