Interesting weekend reading from Tim Clark's "Japan Internet Report."
(this free newsletter is well worth reading. To subscribe or unsubscribe to JIR, send any message to:
subscribejir@tkai.com
unsubscribejir@tkai.com
~~~~~
Interview with March Kikumoto of WebEggs
This month we enjoyed both online and offline chats with March Kikumoto of WebEggs (www.webeggs.com), a site that provides opportunities for entrepreneurs in Japan to find venture capital and support services. March has a strong finance background, and did much of the production
work for Yahoo Japan's financial quotes page quote.yahoo.co.jp. Not only that, she financed her college education in the U.S. by trading stocks. We asked her to give us an overview of WebEggs and help shed some light on Japan's stock market.
- Tell us about WebEggs. Why are you starting it, and what kind of service are you providing?
In Japan, most venture capital firms just invest money. But Japanese entrepreneurs need a lot more help than just funding. Imagine that there are many good seeds for, say, premium apples. The seeds won't grow without well-cultivated soil. And even if the seeds are planted in
good soil, they still need water, sun, and fertilizer to grow.
The soil is the community that WebEggs.com is trying to create. The seeds are entrepreneurs' business ideas and plans. The water, sun, and fertilizer are the funding, facilities, and support services that member companies provide. We are trying to create a community in which all
sorts of support companies participate to create a partnership network that helps entrepreneurial businesses grow. At the present time, PricewaterhouseCoopers, UUNet, NTT Software, and HP have joined us as sponsoring firms.
Ultimately, we hope to develop WebEggs.com such that entrepreneurs visiting our site with business plans or ideas will be able to gain access to the funding, people, and services that will enable them to grow their concepts into real, successful businesses. We will officially launch WebEggs.com in mid-May.
- Help us understand the Japanese stock market. Why does a single share of stock end up being priced so high in Japan?
Many factors. First of all, Internet companies such as Yahoo! Japan have very few shares outstanding. For example, Yahoo! Japan has 57,908 shares outstanding, while Sony has 907,278,326 shares outstanding. This creates an unbalanced relationship between buyers and sellers. What happened with Yahoo! Japan is that stockholders did not want to sell,
yet there were many people who wanted to buy. It is just a typical supply and demand relationship. When you have few shares outstanding, the stock price is more likely to be influenced by this relationship than by actual company value.
Second, high-tech stock fever in the U.S. also influenced the Japanese market. It is generally believed that the Japanese economy follows the U.S. - what happens in the U.S. will happen in Japan sooner or later. Finally, the overly high price decreases the liquidity of the stock,
which in turn causes high price volatility.
- Why do companies issue so few shares?
There are regulations about stock splits and other issues in Japan that don't exist in the U.S. One rule stipulates that paid-in capital divided by the number of shares outstanding must be equal to or greater than 50,000 yen. In other words, the 50,000 yen face value of each share (about U.S. $476) has to be matched by cash in the bank. Therefore few pre-IPO companies can afford to issue tens of thousands of shares, let alone hundreds of thousands or millions.
- Why do shares of some companies not trade at all on some days?
Simply because of a lack of buyers. I am sure that there are many penny stocks in the U.S. that don't trade at all as well. In Japan, two reasons for these no-trade days include 1) the company is discovered to be financially unsound, or 2) the company's credibility is called into
question (Hikari Tsushin, for example). When something like this happens, there may simply be no buyers for the stock!
- How is the bursting of the Internet bubble in the U.S. affecting Japan?
Since historically, the Japanese market tends to be influenced by downward (rather than upward) movements in U.S. stock markets, it did cause a downward movement for a short period of time. But most experienced investors anticipated the downward movement in NASDAQ. It is not a surprise at all. The market was going too crazy. We're now
going through a market readjustment. I expect U.S. high tech stock investors to move in four different ways: 1) stay in high tech stocks either because prices went down too low to sell, or because they continue to believe in the companies, 2) get out of individual stocks and start investing in mutual funds and bonds, 3) get out of high tech stocks and start investing in blue chip stocks, or 4) leave the U.S. stock market and start investing in other countries such as Japan where there's more room for price growth.
So I believe that the NASDAQ drop won't neccessarily have a strong negative impact on Japanese high tech stocks.
- Will there continue to be a series of successful Internet-related IPOs such as Rakuten Ichiba?
I would say that it depends upon which market startups go to for their IPOs. For example, Rakuten Ichiba went public on JASDAQ, which has much higher standards and a longer history than MOTHERS. It has greater potential to be successful. As for NASDAQ Japan, it has higher standards than MOTHERS. So we can expect more liquidity in the market. I would say that the success of NASDAQ Japan depends upon what kind of companies go out there first. If many solid businesses go public on NASDAQ Japan, it will be
able to keep attracting many investors, which in turn will generate more success stories.
March Kikumoto
Business Development Executive
mailto: march.kikumoto@twc-jp.com
tel: (813) 5464 0394 ext. 118 fax: (813) 5464 0387
webeggs.com
The Web Connection twc-jp.com
Winning Solutions in the Digital Economy |
