New Livedoor allegations spark selloff



New Livedoor allegations spark selloff

Claims that company tampered with earnings sparks selloff, forces the TSE to suspend trading.

January 18, 2006: 10:55 AM EST

TOKYO (Reuters) - New allegations emerged Wednesday that Livedoor Co. tampered with its earnings statements, prompting a suspension of the Japanese Internet portal's shares and chaos in the stock market.

Local media reports said the high-profile company, known for its aggressive acquisition strategy, was now being investigated for window-dressing its revenues for the year ended September 2004 so it could disguise a loss as a profit.

Trading in Livedoor shares was suspended during the morning. The suspension was lifted in afternoon trade, but the shares remained untraded as they faced a flood of sell orders.

The shares were marked down by the daily ¥100 limit for a second day to ¥496. If they traded at that price, more than $1.8 billion of the company's market value would be wiped out.

Fallout from the Livedoor investigation triggered a selloff in the broader stock market for a second straight day, forcing the early shutdown of the Tokyo Stock Exchange after the number of transactions threatened to exceed its computer system's capacity.

The benchmark Nikkei average closed down 2.94 percent.

"I can understand Livedoor's bewilderment, but we can't sympathize with them," Taizo Nishimuro, president and chairman of the Tokyo Stock Exchange, told reporters.

"We need more updated information and better disclosure," he said, adding that the bourse was prepared to take action if the company did not provide more details.

Investigators from the Tokyo District Prosecutors office and the Securities and Exchange Surveillance Commission raided Livedoor's offices late Monday on suspicions the company had spread false information to investors.

Livedoor has so far said only that it will make specific comments after it has finished conducting its own investigations regarding the allegations.

The Tokyo bourse said later Wednesday it had asked Livedoor to submit its findings by Friday.

UBS Warburg analyst Atsushi Shinoda said in a research note Tuesday that it had put its "buy" rating on Livedoor under review until the facts become clearer.

Monex Securities, a unit of Monex Beans Holdings Inc., said it would not accept shares in Livedoor and its four separately traded group companies -- Livedoor Marketing, Livedoor Auto, Turbolinux Inc. and Dynacity Corp. -- as collateral for margin trading.

Authorities have not provided further details about their investigation since the initial statement, but media reports said they were focusing on Chief Executive Takafumi Horie and company director Ryoji Miyauchi, who oversees merger transactions.

Miyauchi told reporters Tuesday that he's prepared to take responsibility, although he believes Livedoor operated within the law.

Sources have said the investigation initially centered on the acquisition in 2004 of a publishing firm, Money Life, by a predecessor of Livedoor Marketing.

The sources said Livedoor and Livedoor Marketing made misleading statements about the acquisition, which were made months before the announcement.

Livedoor has grown rapidly to amass a broad portfolio of Internet-related businesses from software to online financial services.

For the year ended Sept. 30, Livedoor reported a net profit that more than tripled from a year earlier to ¥15.48 billion as sales jumped 154 percent to ¥78.42 billion.

Horie, the company's maverick chief executive, has made many enemies in Japan's staid corporate and media world with his "bare-knuckled" business practices and brash personality.

The 33-year-old college dropout emerged as a media fixture in 2004 when he launched a bid to buy a professional baseball team.

He then shook Japan's conservative broadcast industry last year when he took advantage of a structural loophole to try to take control of the sprawling Fuji Sankei media empire. Both attempts failed.

He also ran for parliament in a general election last September but lost to an old-guard incumbent.

Panic selling shuts Tokyo exchange early

Probe of Internet company, weak tech earnings spur stampede

Bottom of Form

TOKYO, Japan (CNN) -- A massive sell-off sparked by a criminal investigation of a high-profile Internet company and weaker-than-expected U.S. tech earnings forced the Tokyo Stock Exchange to suspend trading in the world's second-largest market.

Panic selling also swept through other Asian markets Wednesday and later spilled over into Europe and North America.

The TSE, which has been hit by technical glitches in recent months, halted all trading 20 minutes before the official market close when the huge number of transactions threatened to overwhelm the exchange's computerized system.

However, the exchange said morning trading would begin as usual Thursday, although the afternoon session would be delayed by 30 minutes daily until further notice.

"We plan to restart the exchange as normal and will keep a close watch on how trading develops," TSE President Taizo Nishimuro told reporters. "Our goal is to handle things in a way that won't invite confusion."

The extraordinary decision to suspend trading was prompted by concerns that transactions would exceed the system's capacity of 4.5 million. The TSE later said the number of trades hit a record 4.38 million Wednesday.

The sell-off pushed the Nikkei stock average -- the key index of 225 leading shares -- down 464.77 points to 15,341.18. That was 2.94 percent lower than Tuesday's finish. At one point Wednesday, the index was down more than 4 percent.

The TOPIX, a broader index of stocks, finished down 3.49 percent to 1,574.67 after being down more than 5 percent at one stage.

Other markets in the region were also affected, with Taiwan losing more than 3 percent and South Korea dropping 2.6 percent.

European markets ended lower as the Nikkei's plunge unnerved investors who were already shaken by disappointing earnings from Intel (Results) and Yahoo (Results) late Tuesday in the United States. (Full story)

In New York, stocks also slumped as the full impact of weaker-than-expected profits by the technology giants was beginning to be felt. (Full story)

"The cause (of the sell-off) was threefold -- Livedoor, America and a mess-up by the Tokyo Stock Exchange," Seiichi Miura, an investment strategist at Mitsubishi UFJ Securities, told The Associated Press.

"People got worried about what's going to happen tomorrow if we can't sell today."

In Tokyo, the troubles for Livedoor -- a favorite of small investors -- began when investigators raided its headquarters late Monday, after media reports that it had given false information to investors.

The national daily Yomiuri Shimbun reported that Livedoor is suspected of concealing a $8.7 million deficit for the year ending in September 2004.

The reports prompted a sell-off in Livedoor shares, wiping about $300 million off its market value. The company's flamboyant chief executive, 33-year-old Takafumi Horie, has denied any wrongdoing. (New Livedoor allegations emerge)

The TSE's decision to suspend trading highlighted growing concerns about its computerized handling systems -- prompted by glitches such as a malfunction on November 1 that halted transactions for all but the final 90 minutes.

"It is an embarrassment for this to happen in the world's second-largest economy and that's the emotional aspect of the debate," Hideo Ueki, chief investment officer at UBS Global Asset Management Japan, told Reuters.

"I'm pretty sure the NYSE (the world's biggest exchange) has only had to shut down for snow or a black-out."

Wednesday's plunge was the second straight drop in the Nikkei. Some analysts said the Livedoor probe merely triggered a long-overdue correction in the market.

"While this was an abrupt drop, even if the Nikkei had broken under 15,000 it would have been a fall of around 10 percent. I think that is a completely natural correction," Hajime Yagi, general manager of Japanese equity investment at Meiji Dresdner Asset Management, told Reuters.

Added Hitoshi Yamamoto, president of Commerz International Capital Management: "I had expected a market correction of an almost 10 percent fall sometime between January and March.... The pace of the rally was too fast."

Japan trading exec found dead

Authorities investigating cause; dead man's firm involved in Livedoor takeover deals.

January 19, 2006: 8:48 AM EST

TOKYO (CNN) - An executive of a Japanese securities firm involved in takeover deals by the high-profile Internet startup Livedoor has been found dead, police say.

The executive, Hideaki Noguchi, 38, was found dead on the southern island of Okinawa, according to Kyodo news agency, quoting police in a report Thursday. Authorities said tests would be needed to confirm the cause of death.

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Kyodo, quoting police in the Okinawa capital Naha, said that Noguchi apparently slit his wrist at a Naha hotel on Wednesday. He was taken to the hospital but died there.

Noguchi worked for H.S. Securities, a company involved in the acquisition of publishing company Money Life by ValueClick Japan, the predecessor of Livedoor subsidiary Livedoor Marketing.

This deal is at the center of the investigation into Livedoor that prompted a massive sell-off on the Tokyo Stock Exchange Tuesday and Wednesday, raising volume levels so much that the TSE suspended trading 20 minutes early because its computer systems were being overloaded.

The Japanese sell-off, aided by weaker than expected earnings for key U.S. tech stocks Intel and Yahoo, was followed by substantial falls Wednesday in other markets, including Europe and Wall Street.

But on Thursday the benchmark Nikkei index rebounded, climbing to close up 2.3 percent.

The Tokyo District Public Prosecutor's office raided Livedoor's Tokyo headquarters and other locations on Monday on suspicion it may have released false information on the Money Life acquisition and earnings.

According to the Nikkei news network, H.S. Securities has not commented on its involvement in the Money Life deal, but said in a statement it believed it had acted within the law on two other deals under scrutiny. H.S. Securities said its offices had also been searched.

Livedoor, headed by the high-profile entrepreneur Takafumi Horie, on Thursday released the results so far of its own internal investigation of the Money Life deal. It defended its decisions and fund-raising steps, including the use of a share swap deal rather than a cash purchase.

Livedoor said it would continue the internal investigation, the Nikkei news network reported.

"We have officially asked Livedoor to submit the findings of its internal investigation by Friday," Tokyo Stock Exchange President Taizo Nishimuro told a news conference on Wednesday.

"We'll have to see that outcome first," Reuters quoted him as saying.

Sources familiar with the situation said the official investigation initially focused on whether Livedoor and Livedoor Marketing had made misleading statements about the Money Life acquisition.

Local media reports, however, said Livedoor was now suspected of acquiring Money Life as well as two other companies expressly so it could beef up its accounts with profits created from the transactions, Reuters reported.

Livedoor and Livedoor Marketing said in a joint statement they believed that they did not have to disclose the acquisition of Money Life when it was bought by an investment fund associated with Livedoor because the fund was not directly controlled by Livedoor's investment unit, Livedoor Finance.

Even if Money Life was treated as a group company, they said, they were unlikely to have been required to disclose the initial acquisition by the fund under Tokyo Stock Exchange rules.

Livedoor later bought Money Life from the fund and disclosed the acquisition then.

Under Horie, a media-savvy 33-year-old, Livedoor has rapidly built up a portfolio of nearly 50 Internet-related businesses.

But Horie has ruffled feathers in conservative Japanese business circles through a failed attempt to take over the Fuji Sankei media group and an unsuccessful run for parliament in the September 2005 general electi

Nikkei rebounds after big sell-off

Thursday, January 19, 2006 Posted: 0630 GMT (1430 HKT)

Bottom of Form

TOKYO, Japan (Reuters) -- Japan's Nikkei is up more than 2 percent at the end of the morning session Thursday after a massive sell-off the previous day.

Investors are buying again after this week's three-day slide that saw the Tokyo Stock Exchange bring trading to a halt 20 minutes early on Wednesday because of the overwhelming volume of trade.

Other Asian markets are also rebounding.

Tokyo's Nikkei 225 average is up 2.02 percent to 15,651.42 at the break, steadying after falling 6.8 percent in total over the last three sessions.

Investors are buying Internet communications conglomerate Softbank Corp., up 11.4 percent, and tech stocks such as chip equipment maker Advantest Corp.

Elsewhere in the region, strength in mining issues is helping drive Australian stocks higher.

Also positive for market sentiment was a fall in oil prices to below $66 a barrel, thanks to unusually warm weather in the United States, which curbed demand for heating oil.

Tokyo's market had dropped in the last three days on news about an investigation into suspected securities laws violation by Internet firm Livedoor Co., and disappointing earnings from top U.S. tech stocks, including Intel Corp.

A shutdown of the Tokyo Stock Exchange on Wednesday due to massive sell orders had further undermined sentiment.

Concerns about system capacity at the Tokyo Stock Exchange may still weigh on the market. The exchange will shorten afternoon trading by 30 minutes from Thursday for the time being, in order to avoid computer system trouble.

Afternoon trade will began at 1 p.m. (0400 GMT) instead of the usual 12:30 p.m. and will finish at 3 p.m.

On Wednesday a flood of transactions in a stampede of selling forced the world's second-largest exchange to halt trade 20 minutes earlier than usual to avoid swamping its order processing systems.

"The Nikkei and the TOPIX index have both fallen around 7 percent, so I think investors are starting to think that some stock prices look reasonable," Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

"Because Japanese fundamentals are strong, shares in the country's leading companies are starting to look attractive."

South Korean stocks are up about 0.6 percent Thursday after shedding a total 4.8 percent in the last two sessions as Samsung Electronics , Hynix Semiconductor and top lender Kookmin Bank return to favour.

"For the most part, the market seems to have absorbed the negative factors out there, and with oil prices also falling, we may see a rebound in IT and other stocks," said Kim Hak-kyun, an analyst at Goodmorning Shinhan Securities.

In Australia, gains of about 2 percent for global miners BHP Billiton and Rio Tinto has helped drive the S&P/ASX 200 index up 0.70 percent and off a two-week low.

UBS raised its forecast for Rio Tinto's 2005 earnings after the mining giant reported on Wednesday better-than-expected iron ore and molybdenum production in the December quarter.

Woodside Petroleum advanced 1.8 percent after the oil and gas producer said its fourth-quarter earnings rose 31 percent on increased production and higher global crude prices.

On Wall Street, blue chips fell 0.38 percent Wednesday while the technology-laden Nasdaq Composite Index slid 1 percent after disappointing earnings from top tech firms such as Intel Corp.

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