Livedoor - Why Do They Have Money?

[Big Booger]

This is nothing like Enron. Was LiveDoor gaming the energy markets, causing the heating bills for tens of thousands of people to shoot through the roof?

Interesting how there's nothing in the news about Huser or Abe and Mori's connection to them...

I didn't mean that the business practices of Enron and Livedoor are exactly the same. I meant it more as the top execs of a company that cooks the books or does something dishonest... and then gets busted publicly and the news runs with it.

I am sure those who invested in Livedoor have been giving themselves a good kick in the ass.

But if you look at Enron it does look a lot like Livedoor:

In just 15 years, Enron grew from nowhere to be America's seventh largest company, employing 21,000 staff in more than 40 countries.
But the firm's success turned out to have involved an elaborate scam.
Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn't show up in the company's accounts.

Sound similar? I think so.

[kamome]

This is nothing like Enron. Was LiveDoor gaming the energy markets, causing the heating bills for tens of thousands of people to shoot through the roof?

Interesting how there's nothing in the news about Huser or Abe and Mori's connection to them...

And what's irritating to me is that the Bush administration's link to Enron never got fully vetted in the press. They got a huge pass with that one.

[Mulboyne]

I don't think Livedoor looks much like Enron. The scale of the Enron fraud was unprecedented in terms of its scale and diversity of victims. A better overseas comparison would be with Australian entrepeneur Alan Bond. He was also a consumate self publicist who was a local hero when he famously won the Americas Cup. Bond also had an appetite for media properties which he showed when he bought the Channel Nine TV station from Kerry Packer. He also funded Bond University in Queensland with the Japanese property group EIE who, incidentally, were largely responsible for bringing down the Long Term Credit Bank of Japan (LTCB). Bond's other "Japan moment" was bidding $53 million for Van Gogh's Irises.

His empire began to unravel when he made an audacious bid for Tiny Rowland's Lonrho group. Lonrho mounted an aggressive corporate defence which included a document which claimed that Bond's financial empire was effectively bankrupt. Shortly afterwards, he was jailed for 30 months following an investigation by the Australian Securities & Investments Commission.

Horie hasn't committed anything like the outright fraud that Alan Bond perpetrated but, if he is indeed guilty of cooking his books, his financial and public dealings will have followed a similar patern. This from the Sydney Morning Herald in 2000:

He was our national hero, an entrepreneur who strutted the world stage, who mesmerised all with that Grand Canyon of a smile.... Medical experts were procured to testify that Bond was a brain-dead ignoramus who could not take the stand.... A couple of days before he was released after less than four years' jail for a fraud involving $1.2 billion, a Northern Territory man was sentenced to one year's jail for stealing $23 worth of cordial and biscuits. Had the same formula been applied to Bond, he would have been in jail for 50 million years.

The officers of Livedoor actually have a vested interest now in claiming that Horie knew nothing of any wrongdoing because if he can stay clean then the group can remain listed and their own personal wealth may yet find some protection.

[Greji]

-nip-The officers of Livedoor actually have a vested interest now in claiming that Horie knew nothing of any wrongdoing because if he can stay clean then the group can remain listed and their own personal wealth may yet find some protection.

I agree and I still think the same as GJ, a slap on the wrist. It is quite possible that the procurator's ordered the arrest to defer from the pressure be exerted by the old guard that are attempting this purge, or exorcism of the young up-start with foreign ways of trading, who they see as an FG lusting for power and hostile takeovers!

[Big Booger]

I don't think Livedoor looks much like Enron. The scale of the Enron fraud was unprecedented in terms of its scale and diversity of victims. A better overseas comparison would be with Australian entrepeneur Alan Bond. He was also a consumate self publicist who was a local hero when he famously won the Americas Cup. Bond also had an appetite for media properties which he showed when he bought the Channel Nine TV station from Kerry Packer. He also funded Bond University in Queensland with the Japanese property group EIE who, incidentally, were largely responsible for bringing down the Long Term Credit Bank of Japan (LTCB). Bond's other "Japan moment" was bidding $53 million for Van Gogh's Irises.

His empire began to unravel when he made an audacious bid for Tiny Rowland's Lonrho group. Lonrho mounted an aggressive corporate defence which included a document which claimed that Bond's financial empire was effectively bankrupt. Shortly afterwards, he was jailed for 30 months following an investigation by the Australian Securities & Investments Commission.

Horie hasn't committed anything like the outright fraud that Alan Bond perpetrated but, if he is indeed guilty of cooking his books, his financial and public dealings will have followed a similar patern. This from the Sydney Morning Herald in 2000:



The officers of Livedoor actually have a vested interest now in claiming that Horie knew nothing of any wrongdoing because if he can stay clean then the group can remain listed and their own personal wealth may yet find some protection.

Don't take my word for it:

http://www.iht.com/articles/2006/01/23/business/horie.php

Google News: Livedoor, Enron's Japanese Cousin?

[Mulboyne]

Don't take my word for it:

http://www.iht.com/articles/2006/01/23/business/horie.php

That Enron mention looks like a gratuitous one by the journalist to try and get his readers to make some kind of connection and engage with his story. He probably compared Koizumi with Margaret Thatcher during the election. To be fair, he's not the only one drawing that parallel but that says more about the foreign media's coverage of the issue rather than its accuracy. I've been struck by how many overseas commentators are rushing to place this episode in a wider context before taking the time to understand or explain what has happened.

For instance, reports have described what prosecutors believe are Livedoor's illegal activities but there has been virtually nothing on what laws have been broken. Anyone dealing with regulatory authorities will be aware that if you want to do something novel where the law is not clear, the authorities will rarely rule in advance. Instead, they reserve the right to make up their mind about something once you have done it. You might even be encouraged to do it by way of the infamous ministry "administrative guidance" and then punished once they decide they don't like it. Foreign firms, who are required to be innovative, are regularly clobbered in this way. Local firms can also get hit, though, as securities companies found out when tobashi compensation payments were ruled illegal.

If we have a clear law that has been breached, then it might be useful to know when it has been breached before and whether all such prosecutions have been successful. One of the later allegations is overstating earnings which sounds like the same offence committed by Kanebo. Does that carry the same penalty as understating earnings which is a common offence in corporate Japan? Who signed off on the accounts and are they liable for any penalty?

A couple of images from the bloggers:

[GuyJean]

Yeah, I can't believe people are comparing this to Enron.. I heard one non-fucked gaijin 'analyst' say this 'could be an indication of some bigger underlying structural problems'.. Fuckin' Eh!.. This is Japan! .. And I thought it was the construction companies that had the 'structural' problems..

Interesting that Horiemon was a puppet candidate for the LDP last erection..

GJ

[Big Booger]

[quote="GuyJean"]Yeah, I can't believe people are comparing this to Enron.. I heard one non-fucked gaijin 'analyst' say this 'could be an indication of some bigger underlying structural problems'.. Fuckin' Eh!.. This is Japan! ]

You can't deny that at least at a superficial level there are many parallels between what happened at Enron and what is happening with Livedoor... the companies might be totally different, different models, business structures and so on... but key issues are there.. that being that they both did something perceived (that is until we find out otherwise) illegal, and not on the up and up, otherwise Horie wouldn't be in jail and Enron didn't go down like Pam Anderson on Tommy Lee.

I am not an analyst, but I can see that the two are related... and to negate the fact that there are similarities is foolhardy. Enron was a huge scandal and Livedoor is only a spec of piss in the pot, but that piss is still the same colour as that of Enron.

[cstaylor]

BB, I think you're comparing apples and oranges, but maybe these are the only two corporate scandals you're familiar with?

[Big Booger]

BB, I think you're comparing apples and oranges, but maybe these are the only two corporate scandals you're familiar with?

I think I just see the similarities where others see differences. I am familiar with a few corporate scandals, worldcom, duke energy, Adelphia Communications and so on... hell even Cheney's Halliburton..

I think though that the majority of the world are familiar with Enron, and to make parallels between Enron and Livedoor is not that farfetched. In fact it makes it easier to comprehend if you do parallel something well-known like Enron and then point out the differences, then some lesser known scandal.

It's not like I'm comparing Martha Stewart's Scandal to this or anything.

[IkemenTommy]

At least with all the media coverage putting the spotlight on Livedoor, you don't hear too much about Huser anymore. Those guys got off easy.

[Mulboyne]

His cell:

[cstaylor]

At least with all the media coverage putting the spotlight on Livedoor, you don't hear too much about Huser anymore. Those guys got off easy.

Totally, and guess who was a huge campaign contributor to Mori-ha last year?

[Mulboyne]

Mother and daughter Livedoor shareholders

[Taro Toporific]

Livedoor share price sinks below 100 yen for 1st time
Kyodo via crisscross, Wednesday, February 1, 2006 at 16:02 EST
TOKYO --The price of Livedoor Co stock sank below 100 yen Wednesday for the first time, compared with nearly 700 yen just before the accounting fraud scandal...more...

[Taro Toporific]

Japan's disgraced Internet guru Horie indicted
AFP, Feb 13, 2006
...Japan's securities watchdog filed a complaint Friday alleging that affiliate Livedoor Marketing released false information in the purchase of a publishing firm in 2004.
If found guilty of the charges, the former executives face up to five years in prison each and fines up to five million yen (42,500 dollars)....more...

[GuyJean]

If found guilty of the charges, the former executives face up to five years in prison each and fines up to five million yen (42,500 dollars).

42,000 dollars!? Oooh, millionaires beware! And we all know the punishment for white collar crime in Japan]suspended for 5'..[/SIZE].. Doesn't that mean no time is served?..

What a joke..

GJ

[Catoneinutica]

Mother and daughter Livedoor shareholders

Anyone remember a few years back how the J-media pompously editorialized that an Enron-style meltdown couldn't possible happen in Japan? Memo to Okurasho: time to liquidate the kulaks!

[IkemenTommy]

My prediction for 2006.. the end of J dot com era.
Hey, it was destined to happen!

[drpepper]

My prediction for 2006.. the end of J dot com era.
Hey, it was destined to happen!

Hell... would have been nice if there had been a start of the J dot com era...

[Taro Toporific]

Livedoor was... nearly 700 yen just before the accounting fraud scandal

I know one should, "Never try to catch a falling knife" but D-A-M-N it's almost a shame it's being delisted. The Nikkei service in mid 2005 was saying that Livedoor's per-share net asset value of 185 yen.

[INDENT]
Livedoor stock dives to 66 yen
Crisscross - News -Saturday, March 11, 2006 at 05:00 EST
TOKYO ---The stock price of Livedoor Co dropped 12 yen, or 15.38%, Friday to 66 yen per share, on news that it will be delisted following a fresh criminal complaint by the government's central financial regulator against its former top executives...more...[/INDENT]

[Mulboyne]

Well, now we have a real price for a major transaction in Livedoor shares:
Asahi: Usen to buy all Fuji TV shares in Livedoor

...Usen President Yasuhide Uno will spend about 9.49 billion yen of his own money to purchase the 12.7-percent stake Fuji Television Network Inc. holds in Livedoor...Uno will pay Fuji TV 71 yen per share--16 yen lower than Thursday's closing price--to become Livedoor's second-largest owner after founder and former president Takafumi Horie...

[tidbits]

Question from complete idiot about shares here: What happen to those shares holders after the company delisted? I mean can the company be listed again 3 years later and these papers still have value?

[Mulboyne]

When a company delists from the stock market, you still remain a shareholder. In Livedoor's case, it is being forced to delist but sometimes companies choose to go private. What changes is that shares in the company can no longer be traded on the stock market. If you want to sell them while they are unlisted, you have to arrange a private transaction with a buyer which is a lot trickier. You are still entitled to dividends but Livedoor wasn't paying dividends before and isn't in a position to do so now.

Livedoor could be rehabilitated and try to relist in a few years. Alternatively, another company could offer to buy Livedoor while it is unlisted. This could work two ways: they could offer to buy the company in cash in which case shareholders will have to decide if the price is good enough. If most agree then even those who don't agree will be obliged to sell. Alternatively, a purchaser could offer to swap their shares for your shares. If the company is listed, then existing Livedoor shareholders will end up owning shares in the acquiring company which could be sold on the stock market. If a private company makes the offer, then the shares will continue to be unlisted. Whatever route an acquirer takes, it won't be anywhere near the peak price of the shares. When Usen bought their stake, they paid 71 yen a share.

Some professional investors have taken stakes in Livedoor because they believe it will be bought outright. On paper, Livedoor still has cash on its balance sheet which seems to support the lower valuation. Other professional investors think they are nuts because there are still outstanding legal claims against the company (separate from the charges levelled at Horie et al) so estimating the value of Livedoor could be little better than guesswork.

Although Livedoor's directors are supposed to act in the interests of shareholders, when the company is delisted, this means little in practice. They could accept a bid for the company which guarantees their jobs but is lower than minority shareholders might choose. They could agree to settle legal claims at a higher price than a court would have decided in order to reduce uncertainty and allow a takeover. They could issue new shares to a third party which would dilute existing shareholders and reduce the value of their stakes. All of these are possible outcomes but I don't think anyone really knows what is likely to happen.

[Buraku]

tinateoh

Livedoor is fucked,
but the hardcore beancounters and thrill seeking investors still think there's a bit of money up for grabs

Think of a large mammal that has fallen victim to a predator ( The TSE and LDP's Japan prosecutors)...now think of the vultures who think livedoor still has something to offer by picking meat off the Hideaki Noguchi bones

[Mulboyne]

Here's one possible outcome:

Asahi: Usen is considering dissolving Livedoor

Cable broadcaster Usen Corp. is considering dissolving Livedoor Co. after turning it into a subsidiary, a plan that might not sit well with shareholders of the scandal-ridden Internet company, sources said...Under the dissolution plan, Usen will issue new shares and exchange them for Livedoor stock from the company's shareholders to make it a subsidiary...But Usen must first win the backing of shareholders with at least two-thirds of Livedoor shares to implement the dissolution plan. Since many Livedoor shares are held by investment funds and individuals, it is unclear if Usen can gain the required support...In addition, Usen is waiting for the results of an assessment on Livedoor's assets to be announced later this month. If Livedoor had lied about the value of its assets, Usen's plan to make a Livedoor a subsidiary could be called off...more...

[Mulboyne]

Crisscross: Shareholders to launch damages suit against Livedoor in late May

Some 1,000 shareholders in Livedoor Co will launch a damages suit in late May against the Internet firm and its former executives in a bid to recover their losses from a sharp fall in its stock price following allegations of accounting fraud, their lawyers said Thursday. These shareholders are expected to seek 4 billion to 5 billion yen in damages, the lawyers told a news conference.

[Kuang_Grade]

While some of this may be true, I suspect that much of the problem would be that J folks wouldn't bitchy and sufficiently backstabbing enough to be make the show entertaining. Now a yakuza version of the show, that's got some potential.

From FT
http://news.ft.com/cms/s/77c37ea0-cf40-11da-925d-0000779e2340.html
Japanese bosses not fired by the chance of playing the Sugar role
By David Ibison in Tokyo
Published: April 19 2006 03:00 | Last updated: April 19 2006 03:00

"You're fired!" The dreaded words have become synonymous with the television series The Apprentice that has built cult audiences in the US and the UK with a combination of fly-on-the-wall reality TV and the cut-throat world of business.

But they are words destined never to be heard on Japanese television.

Year-long attempts by Fremantle Media, a television production company, to introduce a version of The Apprentice have hit a wall - the reasons behind the failure illustrate an intriguing characteristic of Japan's distinctive form of capitalism

Despite decades of exposure to western free market practices and recent seismic shifts in corporate Japan exemplified by a series of high-profile mergers, the Japanese concept of success differs markedly from that of the west. "I guess you have to be more humble about success in Japan," says a Fremantle executive.

The Apprentice involves a high-profile tycoon - property magnate Donald Trump in the US and electronics millionaire Sir Alan Sugar in the UK - hiring a group of ambitious trainees, testing them to the limit and firing one a week until the sole survivor wins a full-time job.

Cameras follow their every move, witness every flirtation and capture every humiliation, culminating in the finale when an unlucky threesome are summoned to the boardroom and one is unceremoniously sacked. "You're a lightweight," shouted Sir Alan in a recent episode. "You're fired."

The cameras show the trappings of success that can accrue to those who have made it. The apprentices stay in a luxurious house with a jacuzzi and a pool, while the celebrity tycoons flaunt their cars, helicopters, houses, wives, friends and disposable incomes.

The Japanese programme was to be largely the same but tailored to its audience. For example, instead of "You're fired", each episode's denouement would feature a Japanese phrase used by sword-carrying Samurai warriors, best translated as "Off with your head!" Armed with this idea, Fremantle executives contacted a number of tough- guy businessmen in Japan about the Trump/Sugar role.

They were turned down by Masayoshi Son, head of Softbank; Carlos Ghosn, chief executive of Nissan; Miki Watanabe, president of Watami Food Service; and Masahiko Uotani, president of Coco-Cola Japan, before finally getting a bite of interest from Yoshitaka Kitao, president of SBI, the investment arm of Softbank, before he too pulled out.

The reasons the executives gave for their lack of interest were telling. Most cited a deep reluctance to draw attention to themselves, the opposite of the recent trend towards celebrity CEOs in the west that Mr Trump has come to personify.

Richard Jerram, economist at Macquarie Securities, says: "Most Japanese companies are presented as the cumulative effort of many individuals rather than the creation of a single person."

The programme's difficulties were exacerbated by the fall from grace of Takafumi Horie, former president of Livedoor, the high-profile internet company, now languishing behind bars charged with fraud and share price manipulation.

Mr Horie's demise triggered a bout of anti-capitalist browbeating, with newspaper editorials and business executives bemoaning a rapacious money culture and highlighting the benefits of Japan's more responsible form of economic collectivism. "Capitalism red in tooth and claw is not how Japan wants to behave," says Mr Jerram.

In this environment, it would have been impossible for any Japanese executive to have imitated the brash assertiveness of Mr Trump or Sir Alan. "They all kind of pulled their heads in after Horie," the Fremantle executive says.

In Japan there is also a broad reluctance to fire anyone. A job is supposed to be for life and low-performing employees are rarely summarily fired. Instead, they are politely sidelined, transferred to a rural branch office or given a window to gaze out of until retirement - all of which lack the necessary televisual punch.

Fremantle also anticipated problems attracting potential apprentices. In the US and UK, the candidates are lured by the promise of celebrity, big bucks, flash cars and amazing homes. In Japan, such trappings are considered gaudy and inappropriate.

As a result,the Japanese version of The Apprentice has been "fired".

[Mulboyne]

Horie has just been granted bail. Should be walking out of jail any moment.

[Mulboyne]