Japan Firms Urged to Fulfill Accountability for New Share Issues

Tokyo, Dec. 12 (Jiji Press)--As a recent rush of public share
issues by listed Japanese firms to enhance their capital bases are weighing
on the supply-demand balance on the stock market, issuing companies have
been urged to fulfill their accountability for their moves.
Existing shareholders of these companies are strongly concerned
about the share placements that would dilute the per-share value,
complaining of a lack of clear explanations about growth strategies by the
firms.
In the April-September first half of fiscal 2009, the value of
common shares publicly issued by Japanese firms to beef up their capital
bases reached about 2.3 trillion yen, nearly four times the amount for the
whole of the previous fiscal year.
Since the start of the second half in October, such major companies
as electronics makers NEC Corp. <6701> and Hitachi Ltd. <6501>, and
Mitsubishi UFJ Financial Group Inc. <8306>, one of Japan's three megabank
groups, announced plans to issue new shares.
In many of these recent cases, the proportion of newly issued
shares to outstanding shares was higher than the average of 15-20 pct in
past cases. In some cases, the proportion stood at around 30 pct.
A higher proportion could easily dilute the per-share value,
leading to a drop in the stock price of the issuing company.
Regarding this, many stock market analysts say that Nomura Holdings
Inc. <8604> set off the trend.
The brokerage giant issued new shares worth 280 billion yen in
March and 430 billion yen in October, with the proportion of newly issued
shares coming to about 26 pct and 22 pct, respectively.
An official of Nomura Securities Co. said that the perception about
an appropriate level of the proportion may differ depending on economic
conditions.
In times of uncertainty where the economy cannot achieve a cyclical
recovery, companies need to devise bold strategies and strengthen their
financial standing to put them into action, the official said, adding that
they can bring benefits to their shareholders by carrying out such
strategies.
Takao Ono, senior vice president of NEC which unveiled a public
share issue plan in November, said that the company believes it can maximize
its shareholder value in the medium term by promoting its cloud computing
and other operations and achieving profit growth that outpaces the rate of
dilution in its stock value stemming from the new share issuance.
In fact, however, many of the firms that have announced new share
issue plans have suffered drops in their stock prices.
At a press conference in late November, Atsushi Saito, president of
the Tokyo Stock Exchange, said that the recent stock market tumble reflected
concerns about a dilution in the per-share value following a series of
announcements of share issue plans by listed firms. The stock slump should
be taken as punishment from the market, Saito said, noting that existing
shareholders have been victimized most by the rush of share placements.
Teruhisa Kimura, deputy chief of the Japan Association for
Individual Investors, said that he wants companies planning new share issues
to fully explain the aims of their moves.
Financial consultant Mitsugu Maekawa, who runs his own financial
planning office in Tokyo, said that as investors are losing interest in
public placements of new shares, companies hoping to issue new shares may
face difficulties raising funds.
It is urgently needed to increase individual stock investors at a
time when companies are moving to unwind cross-held shares.
But Japanese firms' accountability is insufficient, Maekawa said,
adding that companies eyeing share placements and underwriting securities
firms should examine where problems lie and study ways to make public share
issues acceptable to shareholders.