TOKYO (Reuters) - Toshiba Corp shares jumped by nearly a fifth on Tuesday after a U.S. hedge fund said it had added a stake and the Japanese conglomerate avoided an immediate court injunction on a planned $18 billion sale of its chip business.

Toshiba is scrambling to complete the sale of its chip unit to help cover billions in losses at its now-bankrupt Westinghouse nuclear unit.

But the auction has stalled on disagreements among members of the groups bidding for the world's No. 2 NAND producer as well as a legal battle with Western Digital Corp, its memory chip joint venture partner.

U.S. hedge fund Greenlight Capital, run by David Einhorn, said on Friday the stock may be worth as much as 400 yen once the company resolves its dispute with Western Digital and clears uncertainties around Westinghouse.

Toshiba shares closed up 19 percent on Tuesday at 275.8 yen, giving the crisis-wracked firm a market value of around $10.4 billion. The Tokyo market was closed on Monday for a national holiday.

The stock is still down around 30 percent compared with levels since late December when it flagged potential billions in losses.

"I wouldn't recommend Toshiba to investors. This is a company that cannot even announce its earnings. It could have been delisted," said Fujio Ando, an adviser at Chibagin Securities.

"Toshiba plans to start selling OLED TVs in the autumn but LG is selling them at half their price. Toshiba could end up losing money on that," he added.

Western Digital has sought a U.S. court injunction to block the sale, arguing that any sale requires its consent.

The U.S. court judge on Friday postponed a decision on the injunction and proposed requiring Toshiba to give Western Digital two weeks notice before closing the sale.

The ruling allows Toshiba to proceed with negotiations for now, although it is not expected to help resolve the standoff with Western Digital or speed up the sale process.

Sources have said the auction is also being complicated by a demand by SK Hynix Inc, a member of a Japanese government-backed group chosen by Toshiba as a preferred bidder, that it be given an equity stake in the unit.

Toshiba said last week that it was also considering offers from Western Digital and Foxconn due to the lack of progress in discussions with the preferred bidder.

(Reporting by Taiga Uranaka, Ritsuko Ando and Hideyuki Sano; Editing by Edwina Gibbs)