October 4, 2018 / 12:22 AM / 8 months ago

UPDATE 1-U.S. hedge fund King Street urges Toshiba to speed up share buybacks

(Adds Toshiba statement, share price)

Oct 3 (Reuters) - Japan's Toshiba Corp is "severely undervalued" and should boost share repurchases, U.S. hedge fund King Street Capital Management LP said in a letter on Wednesday.

The hedge fund said Toshiba's current share buyback commitment of 700 billion yen ($6.2 billion) is insufficient and urged the company to speed it up and increase it to 1.1 trillion yen.

"We are frustrated by this lack of progress and cannot stress enough how critical it is that Toshiba begin implementing its buyback immediately. The sooner Toshiba buys back its stock, the greater Toshiba's returns, given its current undervaluation," the hedge fund said.

Toshiba said in a statement it was "considering the mechanics and other details of the share buyback to execute shareholder returns at the earliest possible date".

It stopped short of stating whether it was prepared to revise the buyback plan, noting only that it would "continue constructive communications with shareholders and investors as it works to secure sustainable growth for the group".

Toshiba plans to announce a mid-term business plan next month. After the sale of its prized memory chip unit, the conglomerate is struggling to grow other core businesses such as social infrastructure.

Toshiba shares traded up 2.4 percent early Thursday, compared with a 0.4 percent rise in the broader Tokyo market.

King Street said it owned a 6.5 percent stake in Toshiba.

The hedge fund proposed new independent directors at the company in August, according to a report by the Wall Street Journal. ($1 = 113.8200 yen) (Reporting by Akanksha Rana in Bengaluru, additional reporting by Makiko Yamazaki in Tokyo; Editing by Saumyadeb Chakrabarty and Stephen Coates)

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