|R.I.P. <<Companies can disappear, and so can entire markets>>|
Nasdaq Japan's survival in doubt
Ninety-eight listed firms in limbo; some mull lawsuits
By Bill Clifford, CBS.MarketWatch.com
Last Update: 2:32 AM ET Aug. 13, 2002
TOKYO (CBS.MW) -- Companies can disappear, and so can entire markets.
The bursting of the global tech-and-dotcom bubble has driven many enterprises, new and not-so-new, out of business, and now seems on the verge of claiming as victim the Nasdaq Japan stock market.
At the time of its launch two years ago, Nasdaq Japan Inc. executives were boasting that the market, which operates as a section of the Osaka Securities Exchange (OSE), would sign up 100 listed companies a year.
But it's only managed to attract 98 companies in all, and in the last several days management of the joint venture between the U.S. Nasdaq Stock Market and Japanese Internet investor Softbank (JP:9984: news, chart, profile) has had the unpleasant task of explaining to them the mostly unfavorable scenarios facing the fledgling bourse -- including closure.
"Many of the (stock) issuers were upset by the Nasdaq's recent announcement, and we are being sincere in explaining our options," said Naho Yohda, spokeswoman for Nasdaq Japan.
Nasdaq announced last week it was taking a $10.3 million impairment charge on its investment in Japan and a write-down of a technology platform it was developing to enhance trading in this market. See Nasdaq's second-quarter results. Nasdaq said it would announce the result of a review its operations here by the end of August.
Yohda said Nasdaq Japan's options are: "For us to remain and continue trading in Osaka as we're doing now; for the brand name to remain even if Nasdaq Japan Inc. closes, meaning the OSE pays some fee to Nasdaq for the brand; or, completely closing and withdrawing the brand."
The brand and the possibility of reaching global investors is what attracted companies in the first place. Loyalty also played a role for Starbucks Coffee Japan (JP:2712: news, chart, profile) (SBUX: news, chart, profile) and E-Trade Japan (JP:8627: news, chart, profile) (ET: news, chart, profile) -- whose American parent companies are listed on the Nasdaq in the U.S., and whose names helped to attract lesser-known firms to list shares in Osaka.
Starbucks Japan acknowledged that some investors had called to about what Nasdaq Japan's uncertain future would mean for the company's listing. "We've received no official communication from Nasdaq Japan," a spokesperson said. "When we do, we'll decide on a course of action at that time."
At least a couple of companies are considering legal action against Nasdaq Japan and the OSE. "This is a nightmare for everybody. We were sold on a global brand when we listed on Nasdaq Japan last year," said a senior manager of a Japanese technology company who asked not to be named. "We are considering our shareholders, and what form of complaint -- including a lawsuit -- will best serve their interests."
A number of listed companies reached by phone said they are not actively considering shifting to other Japanese stock markets at the moment.
"If that time comes, we'll study it carefully," Taro Izuchi, president of E-Trade Japan, said through his spokesperson. "I wouldn't expect (a fresh listing) to change the trading volumes in our own stock."
Toyo Securities, lead underwriter for local software developer SystemPro, said its client's plans to list on Nasdaq Japan on Aug. 27 have not changed. SystemPro could not be reached for comment.
If Nasdaq were to pull the plug, share trading on its section of the OSE would continue uninterrupted for a certain period to avoid harm to investors. A handful of companies, such as discount retailer Don Quijote (JP:7532: news, chart, profile), which maintains a dual listing on the Tokyo Stock Exchange, might find the transition easier, however.
Rocky from the get-go
Yet it seems past time for papering over differences between the OSE and Nasdaq Japan and negotiating a future together. Some former Nasdaq Japan employees say the relationship was difficult from the beginning. But the most public sign of a rift came in early June, when Nasdaq Japan threatened in a letter that if the OSE continued to delay the start-up market's planned new trading system, it would seek another partner. See full story.
"We are not proactively talking with the OSE any more," said Yohda.
"Their attitude toward the new investor-friendly trading system seemed to be shaped by a limited number of brokers that were opposed," she said. "The exchange should have considered also the views of institutional and individual investors."
Bill Clifford is Asia bureau chief of CBS.MarketWatch.com.