Nasdaq Japan seen enhancing Softbank strategy
By Kunio Inoue
TOKYO, Feb 23 (Reuters) - The planned launch of Nasdaq Japan will allow Internet investor Softbank Corp to achieve a key ambition -- to create a system for nurturing young ventures from start-up stages to their initial public offering (IPO).
But the scheme could backfire and invite scrutiny by regulators if Softbank moved to dominate the lucrative IPO underwriting business by taking advantage of its position as co-operator of Nasdaq Japan, analysts say.
Nasdaq Japan Planning, a 50-50 joint venture between Softbank and the U.S. National Association of Securities Dealers, parent of the U.S. Nasdaq, plans to set up the Nasdaq Japan market as a new section of the Osaka Securities Exchange (OSE) in June.
Nasdaq Japan is a sister trading system of Nasdaq, the largest U.S. electronic stock market where high-tech giants such as Microsoft Corp (NasdaqNM:MSFT - news) are traded.
The new Japanese market comes amid a wave of new high-tech start-up ventures representing Japan's ''new economy.'' Markets such as Nasdaq Japan are hoping to lure the fast-growing young firms.
It also complements the strategy of Softbank, which has invested aggressively in Internet-related ventures and tried hard to extend its reach into the financial business.
''It's a very sensible move for Softbank to have Nasdaq Japan under its group. But it needs to make sure to maintain the market's integrity because the stock market serves the public interest as well,'' said Kota Nakako, director of equity research at Warburg Dillon Read.
ARRAY OF FINANCIAL AFFILIATES
Softbank already has an array of financial affiliates under its financial unit, Softbank Finance.
Among them are E*Trade Japan, an online brokerage joint venture with U.S.-based E*Trade Group Inc (NasdaqNM:EGRP - news), Softbank Investment, a venture capital unit, and Softbank Frontier Securities, a specialist brokerage unit dealing with the shares of unlisted companies.
Yoshitaka Kitao, president of Softbank Finance and chief financial officer of Softbank, said at a recent seminar that his group aims at providing all financial and consulting services that young companies might need at their every growth stage.
For example, Softbank Investment provides seed money and management consulting to start-up firms, Softbank Frontier Securities provides a primary share market for unlisted firms, and E*Trade underwrites shares when those companies go public on Nasdaq Japan.
The creation of Nasdaq Japan will complete that business strategy. But some analysts are critical. ''The whole scheme seems to be structured to bring profits exclusively to the Softbank group,'' said an analyst at a Japanese brokerage house.
Since the full liberalisation of brokerage commissions in October last year, Japanese brokerage houses have scurried to expand the IPO underwriting business which they believe would provide a promising source of revenues. They are trying hard to lure young companies for that purpose.
The existing stock markets are also following suit. Last November, the Tokyo Stock Exchange (TSE), Japan's largest, launched a new market, called ''Mothers,'' for start-up firms.
''If the Softbank scheme ends up excluding competitors and smacks of any sign of monopoly, it could draw negative reaction from the industry and regulators,'' said the analyst at the Japanese brokerage house.
A Softbank official denied that claim, saying: ''We know Nasdaq Japan is seen as part of our overall business strategy. But we will never force any issuing company to go to Nasdaq Japan. They can go to Mothers, TSE or anywhere else at will.''
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