p2pnet - rss feed: Japan’s Livedoor fiasco
p2p news / p2pnet: The Japanese stock exchange is reeling after it was found college drop-out Takafumi Horie, who in 1997 started Livedoor, the country’s most powerful Net company, may have been infected by the corporate disease. That’s to say, he may have been considerably less than forthright about his financial dealings.
What’s going on? Look to the times for possible answers.
“This week investigators raided Livedoor, the acquisitive internet group, over possible financial irregularities,” says the Financial Times. “Two days later, the Tokyo Stock Exchange had to close early after surging orders overwhelmed its systems.
“The events have shattered the once-staid facade of corporate Japan. They suggest that while the economy is returning to normal, below the surface it is far from business as usual. What is less clear is whether what is going on is simply the country adjusting to unfamiliar challenges, or betokens structural problems that could hold it back.”
Time magazine says, “An investment firm executive linked to the controversy was found hanging in an Okinawa hotel room, an apparent suicide. So why are upstanding members of Japan’s business establishment barely able to contain their happiness? It’s all in how you say ’schadenfraude’ in Japanese.”
It’s a German term meaning “pleasure taken from someone else’s misfortune,” says Wikipedia. But, continues Time, “Right now, the translation is Takafumi Horie, 33, the CEO of Livedoor, the company at the center of the storm. One of Livedoor’s subsidiaries is alleged to have provided false financial information in order to boost its stock price artificially; and a Monday night raid by investigators on Livedoor offices and the homes of its executives precipitated the stock market swoon.”
Last Monday’s, “surprise launch of a criminal investigation into Internet startup Livedoor Co. helped set off a two-day selling binge that swamped its computer system and forced it to halt trading 20 minutes earlier than usual,” says the Japan Times. “It has since delayed the start of afternoon trading by 30 minutes to prevent orders from exceeding its capacity.
“Although fingers are pointing in various directions - at TSE [Tokyo Stock Exchange] executives, Livedoor, and the day-traders who flooded the bourse - the global appetite for Japanese stocks is still strong, analysts said.’Plenty of people inside and outside Japan are mad, but a system glitch doesn’t decrease a listed company’s value,’ said Sadakazu Osaki, executive fellow of Nomura Institute of Capital Markets Research. ‘If there’s only one plane flying to where you need to be, you take it, even if you’re worried about the plane being old’.”
The Japan Times has Osaki and other market watchers expressing “genuine puzzlement” about why the TSE had to close. “It’s an embarrassment,” said Kiyoshi Kimura, a securities analyst and director of the nonprofit Japanese Association for Individual Investors,.
And why did it take the TSE so long to get moving again?
“Trading activity is rising throughout the world. On the New York Stock Exchange, for example, the average daily trading level in 1999 was under 1 million trades a day,” says the Japan Times. “In 2005, the average trading level was 4.83 million a day” and, “That’s a considerable explosion in trade,” Osaki is quoted as saying. “I don’t know what the difference is, but the fact remains that the NYSE hasn’t had to close to avoid an overload, while the TSE did.”
Day-traders are meanwhile upset with the perception that, “their emergence on the scene is one of the reasons the TSE buckled,” says the story which has Yohei Sunada, head of the Japan Day Traders Association, saying, “It’s strange to blame the growing number of day-traders and other small investors” for the fiasco: “For years, the government has said they wanted small investors to invest more. . . . Well, we’re here. Why aren’t they ready?”
Meanwhile, schadenfraude rulz. And back in the US, Time has has an opinion as to why that should be.
The, “glee among the staid suits of Tokyo comes from what Horie has come to represent,” it states.
“Over the last few years, he has become the chieftain of a tribe of internet entrepreneurs who hang out in the shiningly chic Roppongi Hills complex. To this Hills Tribe, the future of business was the internet, in sharp contrast to the long established Square Tribe of neckties and suits who still consider manufacturing the only respectable industry. To the Squares, Horie and the Hills were playing a speculative ‘money game’ with no tangible products.”
Horie has scoffed at disaster before, says the story.
“Once, while he was at the top of the world, Horie said that ‘even if you fail, the worst that you can end up with is zero. You can always reset’.”
However, adds Time, “No doubt he now realizes there is one result even worse than zero - and that’s jail.”
Also See:
Financial Times - Japan at a crossroads, January 21, 2006
Time - The Livedoor Scandal: Tribe versus Tribe, January 20, 2006
Japan Times - TSE plans to upgrade capacity Monday, January 21, 2006
