The collapse of Livedoor

[thomas]

After causing a major economic earthquake in Japan last week, Livedoor's CEO Horie ("Horiemon") has finally been arrested this Monday, sending Livedoor's shares into free fall and the TSE into panic. Horiemon and his execs are accused of having artificially inflated their share value. Livedoor might soon be delisted from the TSE. And, OMG, Horiemon may be forced to move out of Roppongi Hills.



Livedoor chief arrested in Japan

=> http://news.bbc.co.uk/2/hi/business/4638798.stm

Livedoor President Horie, 3 top execs arrested for alleged financial fraud

=> http://www.crisscross.com/jp/news/362014

[celtician]

AW jezus where else can you go from Loppongi Hillsu its only down from there.

[Elizabeth]

Originally Posted by celtician

AW jezus where else can you go from Loppongi Hillsu its only down from there.

On a brighter note, the world is saved from a Horie Shachou CD and songs about his philosophy of life...for the time being at least.

[mad pierrot]

There was a great article in the Yomumuri Shinbun today about Horie. Did anyone else read it? I think it's safe to say he was slightly nuts. God, reading about him reminded me of the movie American Psycho.

[Maciamo]

Horiemon even managed to make the news a few days here in Europe (BBC World, Euronews, CNN...). I wonder if that could be a plot from the old establishment (perhaps from the top management of the Fuji-Sankei Group, which Horie tried to buy a few months ago) to get rid of a troublesome young unconventionalist threatening a few powerful people...

[anjinsan]

I'm not a trained economist, or even very economically savvy--add that to the fact that the news in Japan is not entirely easy to understand even when it's there on the page and you get: I'm confused about what Horie is alleged to have done wrong.

He may not be the first person you think of when the word "altruism" comes to mind, but one wonders at how he has gone so quickly from darling of the media to pariah.

Actually, one doesn't wonder as much as shake one's head.

In the same way as my native US, in Japan it seems people love a celebrity, but love even more to see that celebrity shamed and humiliated.

I agree with Maciamo, or at least I wonder as well if Horie"mon" hasn't been targeted by a group of extremely powerful people (Hello, Fuji TV) for stepping on too many toes. I can't imagine, with the sudden explosion of finger-pointing and 'tsk-tsk'ing the charges have evoked, that everyone throwing stones is "without sin," or, to use a less-biblical metaphor, I find it odd that suddenly so many people apparently see themselve so squeaky clean as they sling mud so viciously at Horie.

Is this a Confucian thing?

[gaijinalways]

Horie was greedy, but it does seem awful quick that he was arrested. This is an 'Enron' type affair in Japan. Livedoor grew mostly by stock splits, but what they are accused of doing is using holding groups that Livedoor controlled to orchestrate buying shares of their own stock early, then waiting until after the split when often based on nothing more than rumor, the stock shot up and Livedoor cashed in through their holding groups. Using the money they made after the stock ran up, they recorded as profits to cover real losses that the company was making.

One of our students, a banker, commented that Livedoor stock had been split over 10000 times within a year! After one of the 100 for 1 stock splits, Livedoor's stock went up in value 8 times. Think about it, how can a company increase in value by 800 times by doing nothing but selling shares!

I've located a few articles that may help some of you get a grasp on what's going on with Livedoor, but the one by Pesek seems to indicate that breaking the law is just fine as long as what you do shakes things up. Of course, we have a long way to go before we see what exactly the prosecutors can prove in court, but from what I've seen so far there are real questions about the tactics used by the Livedoor executives, but Pesek seems to think that everything was fine and aboveboard.

Well, you decide.

Livedoor Case Is a Pivotal One for Japan Inc.: William Pesek

Alchemist or apprentice: a guide to Livedoor hype
.
.

[nice gaijin]

Has anyone heard of this in American media? I have not yet heard a peep on the tube. I find this particularly unfortunate for the Japanese stock exchange, especially the small individual investors that got burned through this schmuck's wrongdoing. It seems that Horie achieved his fame through his multiple failures, and this is just another one to add to the pile.

[thomas]

Originally Posted by nice gaijin

Has anyone heard of this in American media? I have not yet heard a peep on the tube. I find this particularly unfortunate for the Japanese stock exchange, especially the small individual investors that got burned through this schmuck's wrongdoing. It seems that Horie achieved his fame through his multiple failures, and this is just another one to add to the pile.

On Japanese TV they've shown some US coverage on NBC and CNN as well as a front page of Time Magazine displaying "Horiemon", but perhaps that was the Japanese edition...

[nice gaijin]

well I don't watch a whole lot of news on TV, and I listen mostly to NPR and the BBC news on the radio... it's possible it was on and I missed it; but I haven't really heard much dialogue about it outside of forums like this.

[cyberryo]

When the boss of a listed company starts to get too visible in the presence of starlets, throwing too many personal parties, goes round in Ferrari, buying up properties, etc. within such a short period of time, it is likely that he/she has just gone nuts from success overnight and detract from his main business, i.e. managing his company. Same story every time....

[gaijinalways]

Both CNN and BBC have run stories and commentary on it. Horie has balls, but he obviously was trying to grow an empire with very little real business, just stock splits, mergers and acquisitions. The mis-stating of financial results and manipulation of the acquired companies' stock through the use of holding companies is illegal, but Livedoor wouldn't be the only company doing it, far from it. Some other people have an axe to grind with Horie, but it also seems Horie broke the law, and in a way the old guard doesn't like.

The financial markets in Tokyo are still a mess, and something like this should have been caught much sooner. Most of the wild splits and use of stock to buy more and more companies is usually illegal and/or implausible in countries with a more developed stock market systems.

[名無し]

NHK news

Prosecutors Arrest Murakami for Insider Trading

Another corporate giant in Japan stumbles and falls. Investment fund manager Yoshiaki Murakami has been arrested on suspicion of insider trading.

"I would like to sincerely apologize for causing many people trouble."

Mr Murakami held a news conference hours before he was arrested on Monday, and admitted that his purchases of Nippon Broadcasting System shares could be regarded as insider trading.

Yoshiaki Murakami
"Unfortunately, I heard about the plan, but I had no intention to violate the law. Although I consider myself highly professional, I violated the law, and I'm very sorry."

Tokyo district prosecutors suspect that Mr Murakami's fund was engaged in insider trading involving shares of Nippon Broadcasting System. They are investigating the fund's headquarters and his residence in Tokyo.

The Securities and Exchanges Law states that anyone who knows about a decision by a company to buy a stake of five percent or more in a listed firm, is prohibited from buying that firm's shares before the decision is made public.

A person who commits insider trading faces imprisonment of up to three years, or a fine of up to about 27,000 US dollars.

The Murakami fund bought 1.93 million shares of Nippon Broadcasting System shares by January 2005, allegedly after learning in November 2004 that Internet firm Livedoor would buy up shares in the broadcaster.

As of January last year, the investment fund was a major stockholder of Nippon Broadcasting System with 6,090,000 shares.

It sold most of the shares after the price soared following Livedoor's buy-out, gaining more than 270 million US dollars in profit.

Link

[gaijinalways]

Unfortunately, I heard about the plan, but I had no intention to violate the law. Although I consider myself highly professional, I violated the law, and I'm very sorry."

Maybe Horie should try this defense, pleading ignorance instead of arrogance, seems to usually go over well in Japan (especially when accompanied with sincere in appearance apolgies).

[Maciamo]

Originally Posted by gaijinalways

Maybe Horie should try this defense, pleading ignorance instead of arrogance, seems to usually go over well in Japan (especially when accompanied with sincere in appearance apolgies).

Yes, that's because ignorance (of the law) can actually excuse someone in Japan, which isn't the case in Western countries. This alone is very represenative of the low importance the Japanese put into knowledge (as opposed to relations and wealth).

[nice gaijin]

Considering Horie's personality, I wouldn't expect him to plead ignorance any time soon... He's spent so much time promoting himself and building himself up to be some sort of corporate messiah, claiming he didn't know what he was doing would be too damaging to the image he's created for himself. I'm not sure if he'd rather go to jail, but I'd just be shocked if he pled ignorance. In my opinion, it'd be the same as admitting guilt, whether it gets him off or not.

[kkkktttt]

Originally Posted by Maciamo

Yes, that's because ignorance (of the law) can actually excuse someone in Japan, which isn't the case in Western countries. This alone is very represenative of the low importance the Japanese put into knowledge (as opposed to relations and wealth).

excuseにはならなかったから、大金持ちで小泉政権と深い関係にあった堀江容疑者でも逮捕されたわけです。（もっとも、そもそも 彼がそんな弁明にもならない戯れ言を言ったはずはない ですが・・・。）

日本の裁判所は法律を知らなかったからといって見逃し てはくれませんよ。

日本国刑法第38条3項
法律を知らなかったとしても、そのことによって、罪を 犯す意思がなかったとすることはできない。

また、この事件に対する世論を見ても、世間がexcuseと して認めているとは到底思えません。

もちろん、法律の解釈に幅があって、その点について争 いが生じる場合は少なくないですが、とりわけ政策的規 定が多く高度に専門的で複雑な経済関連法規の違反容疑 に関する事件の場合、どこの国においてもそれは一般的 なことですよね。