March 29, 2024

Olympus Delisting Decision Could Go Either Way

On Wednesday, the Japanese company is expected to file its second-quarter earnings, meeting the Dec. 14 deadline the Tokyo exchange had set to keep Olympus shares trading. But the Olympus stock will remain in critical condition, exchange officials say, as long as public investigators are looking into the company’s decades-long cover-up of more than $1 billion in losses.

The stakes are high. A delisting, if it happened, would be preceded by a one-month warning to investors, during which Olympus’s share price would probably be decimated as shareholders dumped the stock. Few might want to be left holding them because, once delisted, the shares would be difficult for most investors to buy or sell. Analysts say delisting could also make the company, a producer of cameras and medical scopes, vulnerable to being dismantled and sold for its parts.

But handicapping the eventual fate of Olympus’s stock is hard to do, because of the inconsistent way that Japanese authorities have policed and censured white-collar crime in recent years. What’s more, the powerful Tokyo Stock Exchange wields considerable discretion in deciding whether to delist, which experts say can make its decisions on such matters seem arbitrary or politically biased.

“Japanese regulators aren’t consistent; they seem to make calls based on political motive,” said Tadashi Kageyama, senior managing director and head of Asia and Japan for Kroll, a global risk consulting company. “These inconsistencies are confusing foreign investors.”

Two cases in the past decade illustrate the discrepancies — or, in critics’ view, the political biases — in the way companies are punished in Japan.

When the Internet start-up Livedoor was accused in 2005 of manipulating its earnings to appear to be more than $40 million, its offices were raided, its stock delisted and its top executives jailed.

But the next year, Nikko Cordial, a prominent Japanese brokerage firm, was accused by financial regulators of padding its books by almost $350 million. Nikko was forced to pay a modest financial penalty. But there was no raid, no delisting and no jail time.

“Japan is still haunted by the Livedoor case; they went after that company like beating up on a drowning puppy in a pond,” said Kenichi Osugi, a professor in corporate governance and restructuring law at Chuo University in central Japan. “It was seen as politics, not justice.”

And so the eventual outcome of the Olympus investigation by police officials, and the company’s treatment by regulators and the Tokyo Stock Exchange, will be seen as the latest indication of which way the corporate winds are blowing in Japan.

Keeping Olympus a listed company would add fuel to accusations that Japan Inc. coddles established players while punishing newcomers like Livedoor, which had dared to rock the boat with a series of ambitious takeover bids before the scandal caused the company to implode. An Olympus delisting, though, would probably incite a furor from those who argue that shareholders should not be unfairly punished for acts by corrupt executives.

Even Michael C. Woodford, Olympus’s ousted president, has said he hopes company shares remain listed for the sake of company investors and employees, even as he calls for a thorough investigation. It was Mr. Woodford who drew attention to the cover-up, first within the company and then publicly after he was fired on Oct. 14.

Mr. Woodford arrived in Japan on Tuesday, his second visit to the country since his dismissal, where he hopes to persuade investors and employees to support his return to the helm of Olympus. The current Olympus board has said it will step down as early as February, but it has not agreed to welcome back Mr. Woodford.

Noriko Takata contributed research.

Article source: http://feeds.nytimes.com/click.phdo?i=dbf118d81aeb1f9c1c12aaaf3639ad60