Chaos in Tokyo bourse over Livedoor probe, trading halted

Chaos in Tokyo bourse over Livedoor probe, trading halted

	Published : Wed, 18 Jan 2006 13:50 By : Cedric Benson Print this Story

TOKYO: As a police investigation got under way against Livedoor Co., one of Japan's best-known Internet companies, on allegations that it tampered with its earnings, the Tokyo stock exchange was in turmoil with investors pressing with their sell orders for the second day Wednesday. The event forced the world's second-largest exchange into an early close, for the first time in 57 years.

The exchange announced that it has stopped accepting any new orders for all listed shares and convertible bonds at 2.40 p.m., 20 minutes before the scheduled close at 3.00 pm, to avoid a possible trading system failure in view of the huge volumes.

As the trading closed, Nikkei index lost 464.77 points or 2.9 per cent at 15,341.18. At one point it touched a low of 15,059.52. This is the largest single-day drop for the index since 10 May 2004. It had then lost 554.12 points.

Kyodo News agency reported the fresh probe Wednesday following an initial investigation Monday on suspicions that a Livedoor subsidiary had violated Japan's securities law by spreading false information. Neither Livedoor nor the prosecutors could confirm the report. However, the company, reacting to the first probe, denied any wrongdoing and said it will cooperate with authorities.

Livedoor offers various Internet services, including consulting, telecommunications, mobile sites and software development. It has also acquired several other companies. Japanese newspapers said Wednesday the company is suspected to have concealed a 1 billion yen loss in the full year results for the period ended September 24. It is charged that the company had transferred about 2.4 billion yen in profits from three affiliates so that it could book net income of about 1.4 billion yen for that year.

The exchange suspended trading of Livedoor's shares for a brief period in the morning, as the stock fell 14.4 per cent Tuesday, the maximum allowed, to 596 yen. Though the suspension was lifted in the afternoon, the stock remained untraded as there were only sell orders.

Livedoor is led by its 33-year-old flamboyant chief executive Takafumi Horie, known for his aggressive business style and bold acquisitions. He had made an unsuccessful hostile takeover attempt for Fuji Television Network Inc.

Tokyo Stock Exchange's president and chairman Taizo Nishimura said the exchange would insist on more updated information and better disclosure and that it is prepared to take action against the company if it did not provide the details.

Sources familiar with the matter said the investigation is focusing on a 2004 acquisition 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 had been made months before the announcement.