Livedoor
Encyclopedia
is an Internet service provider
based in Tokyo
, Japan
, that runs a web portal
and numerous other businesses. The company was founded and led in its first 10 years by Takafumi Horie
, known as "Horiemon" in Japan. Employing over 1,000 people, it had grown into one of Japan's premier Internet businesses as well as one of the country's most controversial enterprises because of its frequent use of acquisitions
and stock swap
mergers to achieve growth, before being brought down by fraud scandals and bought by Korean web portal NHN.
. In 1997, it was renamed Livin' On the EDGE Co., Ltd. Though initially a limited company (yugen kaisha
), Livin' On the Edge was reorganized into a joint-stock company (kabushiki kaisha
) in July 1997 and went public on the Tokyo Stock Exchange
's Mothers market in April 2000. In November 2002, Livin' on the Edge acquired the free Internet services business of Livedoor Corp., which had gone bankrupt. On the Edge changed its name to Edge Co., Ltd. in April 2003, then adopted the name of the ISP business it had acquired from Livedoor Corp., by renaming itself livedoor Co. Ltd. (Livedoor), in February 2004. This was followed by a 1:100 stock split.
In March 2004, livedoor moved to acquire the Kintetsu Buffaloes
, a Japanese baseball
team, but later withdrew its offer and, in September 2004, founded its own team (named livedoor baseball) and applied for admittance to Japan's professional baseball organization. The team's home ground was to be in Sendai, Miyagi
Prefecture, but livedoor lost the competition to be the city's home team to Rakuten
, a Japanese e-commerce company.
Livedoor has made a series of acquisitions in the U.S. including MailCreations in Miami, Florida, in June 2004, which functions as the company's U.S. headquarters. Livedoor also entered the search and contextual advertising space in America in November 2005.
The TSE delisted livedoor as of April 14, 2006, in the wake of a scandal involving securities-law violations.
(including window dressing and share-price manipulation) on January 17, 2006, prompting panic selling
on the Tokyo Stock Exchange
as investors tried to unload Livedoor shares when some brokers announced they would no longer allow use of the issue for margin
trading. Volume was so heavy that it threatened to overload the TSE's computer system, prompting a halt in trading for the entire market—the first time this has ever occurred.
The scandal broke on January 16, 2006, when Tokyo prosecutor
s raided several Livedoor locations, Horie's home, and the homes of other Livedoor and subsidiary executives on suspicions of securities law violations. The raids spooked investors and sent shares plunging on January 17 and 18 as a widening criminal investigation sparked big tech-stock selloffs. The TSE ordered Livedoor to provide an answer to the allegations but was unsatisfied with the company's initial report after a hasty internal investigation. It told the company to come up with a more detailed report and threatened to delist Livedoor if illegalities were proven.
On January 18, 2006, Hideaki Noguchi, an executive of H.S. Securities, a firm raided by prosecutors earlier in the week in connection with Livedoor, was found dead in an Okinawa hotel room after what the authorities are labeling a suicide
. http://www.asahi.com/english/Herald-asahi/TKY200601200213.html
The authorities called in several Livedoor and subsidiary executives for questioning over several days, and Horie himself on January 23. After several hours of questioning Horie, investigators felt they had learned enough to press charges and petitioned for four arrest warrant
s, which were granted. Horie, Livedoor's chief financial officer, and the presidents of two subsidiaries were arrested mid-evening for securities and accounting fraud. They were held for two months without bail, and during this time, Livedoor's temporary Representative Director Fumito Kumagai was also arrested.
Japan's Securities Commission filed a criminal complaint against the five arrested ex-executives of the company on March 13, 2006. Founder Horie was sentenced to 2.5 years in jail on March 16, 2007, but is still out while appealing his conviction (as of Sept 29, 2010), and the others were given various jail sentences four days later, but also appealed.
Fuji Television sued the company for ¥35 billion in damages in March 2007; 1,000 individual investors filed a class-action suit in May 2006, eventually rising to 3,340 asking for ¥23 billion, which resulted in a final ruling of ¥7.6 billion against Livedoor, and other similar suits resulted at least one judgment of ¥4.9 billion. Livedoor in turn sued its own executives, with founder Horie settling for ¥21 billion and six others settling for a total of ¥760 million.
There were rumors that LiveDoor was speaking with several investment bankers about an $2 billion initial public offering in 2008, and several internet portals expressed interest in participating, but no IPO ever materialized. Instead, Livedoor put itself up for sale in early 2010 and was purchased by Korean web portal NHN for a reported ¥6.3 billion.
Information obtained during the investigation also led to the arrest and conviction of fund manager Yoshiaki Murakami for using inside information to profit off of a stake Livedoor purchased in Nippon Broadcasting System
in 2005.
Horie published an autobiography during his appeals, Complete Resistance, in which he proclaims his innocence and states that he was targeted by the government only due to his infamy, not the actual nature or severity of any crimes.
In order to prevent a recurrence of the scandal, Japan passed a law similar to Sarbanes–Oxley, nicknamed J-SOX
, on June 14, 2006.
, Tokyo
, 160-0021, Japan, but its principal corporate offices are on the 38th floor of the prestigious Roppongi Hills
Mori Tower at 10-1, Roppongi
6-chome, Minato
, Tokyo, 106-6138, Japan.
Internet service provider
An Internet service provider is a company that provides access to the Internet. Access ISPs directly connect customers to the Internet using copper wires, wireless or fiber-optic connections. Hosting ISPs lease server space for smaller businesses and host other people servers...
based in Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, that runs a web portal
Web portal
A web portal or links page is a web site that functions as a point of access to information in the World Wide Web. A portal presents information from diverse sources in a unified way....
and numerous other businesses. The company was founded and led in its first 10 years by Takafumi Horie
Takafumi Horie
is a Japanese entrepreneur who founded Livedoor, a website design operation that grew into a popular internet portal. After being arrested on accusations of securities fraud in 2006, he severed all connections with the company. He was granted bail, and the trial began on September 4, 2006...
, known as "Horiemon" in Japan. Employing over 1,000 people, it had grown into one of Japan's premier Internet businesses as well as one of the country's most controversial enterprises because of its frequent use of acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
and stock swap
Stock swap
A stock swap, also known as a share swap, is a business takeover or acquisition in which the acquiring company uses its own stock to pay for the acquired company. Each shareholder of the newly acquired company receives a certain number of shares of the acquiring company's stock for each share of...
mergers to achieve growth, before being brought down by fraud scandals and bought by Korean web portal NHN.
History
Livedoor started in 1995 as Livin' on the Edge, a web consultancy run by Horie and a group of student friends and was officially founded as Livin' On the EDGE Inc. in April 1996, in Minato, TokyoMinato, Tokyo
is one of the 23 special wards of Tokyo, Japan. As of 1 March 2008, it had an official population of 217,335 and a population density of 10,865 persons per km². The total area is 20.34 km².Minato hosts 49 embassies...
. In 1997, it was renamed Livin' On the EDGE Co., Ltd. Though initially a limited company (yugen kaisha
Yugen kaisha
A yūgen gaisha or yūgen kaisha is a form of business organization in Japan....
), Livin' On the Edge was reorganized into a joint-stock company (kabushiki kaisha
Kabushiki kaisha
is a type of business defined under Japanese law.-Usage in language:Both kabushiki kaisha and the rendaku form kabushiki gaisha are used. The "K" spelling is much more common in the names of companies and in English-language legal literature, whereas the "G" pronunciation is dominant in...
) in July 1997 and went public on the Tokyo Stock Exchange
Tokyo Stock Exchange
The , called or TSE for short, is located in Tokyo, Japan and is the third largest stock exchange in the world by aggregate market capitalization of its listed companies...
's Mothers market in April 2000. In November 2002, Livin' on the Edge acquired the free Internet services business of Livedoor Corp., which had gone bankrupt. On the Edge changed its name to Edge Co., Ltd. in April 2003, then adopted the name of the ISP business it had acquired from Livedoor Corp., by renaming itself livedoor Co. Ltd. (Livedoor), in February 2004. This was followed by a 1:100 stock split.
In March 2004, livedoor moved to acquire the Kintetsu Buffaloes
Kintetsu Buffaloes
The was a Nippon Professional Baseball team based in Osaka, Japan, which were in the Pacific League. The team was owned by Kinki Nippon Railway Co. and later sold to the Orix Group, the owner of the Orix BlueWave baseball team, in 2004...
, a Japanese baseball
Baseball
Baseball is a bat-and-ball sport played between two teams of nine players each. The aim is to score runs by hitting a thrown ball with a bat and touching a series of four bases arranged at the corners of a ninety-foot diamond...
team, but later withdrew its offer and, in September 2004, founded its own team (named livedoor baseball) and applied for admittance to Japan's professional baseball organization. The team's home ground was to be in Sendai, Miyagi
Sendai, Miyagi
is the capital city of Miyagi Prefecture, Japan, and the largest city in the Tōhoku Region. In 2005, the city had a population of one million, and was one of Japan's 19 designated cities...
Prefecture, but livedoor lost the competition to be the city's home team to Rakuten
Rakuten
operates and manages business to consumer electronic commerce site, Rakuten Ichiba, and consumer to consumer auction site, Rakuten Freemarket. Its business is centered in Japan, although it has began international expansion through acquisitions. The chief executive officer is Hiroshi Mikitani...
, a Japanese e-commerce company.
Livedoor has made a series of acquisitions in the U.S. including MailCreations in Miami, Florida, in June 2004, which functions as the company's U.S. headquarters. Livedoor also entered the search and contextual advertising space in America in November 2005.
The TSE delisted livedoor as of April 14, 2006, in the wake of a scandal involving securities-law violations.
Fraud allegations
The media reported allegations of securities fraudSecurities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
(including window dressing and share-price manipulation) on January 17, 2006, prompting panic selling
Panic selling
Panic selling is a wide-scale selling of an investment, in order to get out of an investment . The main problem is that investors react simply out of emotion and fear, without evaluating the fundamentals. Almost all market crashes are caused by panic selling. Most major stock exchanges use trading...
on the Tokyo Stock Exchange
Tokyo Stock Exchange
The , called or TSE for short, is located in Tokyo, Japan and is the third largest stock exchange in the world by aggregate market capitalization of its listed companies...
as investors tried to unload Livedoor shares when some brokers announced they would no longer allow use of the issue for margin
Margin (finance)
In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty...
trading. Volume was so heavy that it threatened to overload the TSE's computer system, prompting a halt in trading for the entire market—the first time this has ever occurred.
The scandal broke on January 16, 2006, when Tokyo prosecutor
Prosecutor
The prosecutor is the chief legal representative of the prosecution in countries with either the common law adversarial system, or the civil law inquisitorial system...
s raided several Livedoor locations, Horie's home, and the homes of other Livedoor and subsidiary executives on suspicions of securities law violations. The raids spooked investors and sent shares plunging on January 17 and 18 as a widening criminal investigation sparked big tech-stock selloffs. The TSE ordered Livedoor to provide an answer to the allegations but was unsatisfied with the company's initial report after a hasty internal investigation. It told the company to come up with a more detailed report and threatened to delist Livedoor if illegalities were proven.
On January 18, 2006, Hideaki Noguchi, an executive of H.S. Securities, a firm raided by prosecutors earlier in the week in connection with Livedoor, was found dead in an Okinawa hotel room after what the authorities are labeling a suicide
Suicide
Suicide is the act of intentionally causing one's own death. Suicide is often committed out of despair or attributed to some underlying mental disorder, such as depression, bipolar disorder, schizophrenia, alcoholism, or drug abuse...
. http://www.asahi.com/english/Herald-asahi/TKY200601200213.html
The authorities called in several Livedoor and subsidiary executives for questioning over several days, and Horie himself on January 23. After several hours of questioning Horie, investigators felt they had learned enough to press charges and petitioned for four arrest warrant
Arrest warrant
An arrest warrant is a warrant issued by and on behalf of the state, which authorizes the arrest and detention of an individual.-Canada:Arrest warrants are issued by a judge or justice of the peace under the Criminal Code of Canada....
s, which were granted. Horie, Livedoor's chief financial officer, and the presidents of two subsidiaries were arrested mid-evening for securities and accounting fraud. They were held for two months without bail, and during this time, Livedoor's temporary Representative Director Fumito Kumagai was also arrested.
Japan's Securities Commission filed a criminal complaint against the five arrested ex-executives of the company on March 13, 2006. Founder Horie was sentenced to 2.5 years in jail on March 16, 2007, but is still out while appealing his conviction (as of Sept 29, 2010), and the others were given various jail sentences four days later, but also appealed.
Scandal aftermath
After losing 90% of its stock price in four months and strong evidence of securities fraud, Livedoor was delisted from the Tokyo Stock Exchange on April 14, 2006.Fuji Television sued the company for ¥35 billion in damages in March 2007; 1,000 individual investors filed a class-action suit in May 2006, eventually rising to 3,340 asking for ¥23 billion, which resulted in a final ruling of ¥7.6 billion against Livedoor, and other similar suits resulted at least one judgment of ¥4.9 billion. Livedoor in turn sued its own executives, with founder Horie settling for ¥21 billion and six others settling for a total of ¥760 million.
There were rumors that LiveDoor was speaking with several investment bankers about an $2 billion initial public offering in 2008, and several internet portals expressed interest in participating, but no IPO ever materialized. Instead, Livedoor put itself up for sale in early 2010 and was purchased by Korean web portal NHN for a reported ¥6.3 billion.
Information obtained during the investigation also led to the arrest and conviction of fund manager Yoshiaki Murakami for using inside information to profit off of a stake Livedoor purchased in Nippon Broadcasting System
Nippon Broadcasting System
, or JOLF, is a Japanese radio station in Tokyo. Together with Nippon Cultural Broadcasting it is a flagship station of the National Radio Network...
in 2005.
Horie published an autobiography during his appeals, Complete Resistance, in which he proclaims his innocence and states that he was targeted by the government only due to his infamy, not the actual nature or severity of any crimes.
In order to prevent a recurrence of the scandal, Japan passed a law similar to Sarbanes–Oxley, nicknamed J-SOX
J-SOX
The , promulgated on June 14th, 2006, is the main statute codifying securities law and regulating securities companies in Japan.The law provides for:* Registration and regulation of broker dealers and their registered representatives...
, on June 14, 2006.
Offices
Livedoor's registered headquarters is located at 16-9, Kabukicho, ShinjukuShinjuku, Tokyo
is one of the 23 special wards of Tokyo, Japan. It is a major commercial and administrative center, housing the busiest train station in the world and the Tokyo Metropolitan Government Building, the administration center for the government of Tokyo.As of 2008, the ward has an estimated population...
, Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
, 160-0021, Japan, but its principal corporate offices are on the 38th floor of the prestigious Roppongi Hills
Roppongi Hills
is a New Urban Centre and one of Japan's largest integrated property developments, located in the Roppongi district of Minato, Tokyo.Constructed by building tycoon Minoru Mori, the mega-complex incorporates office space, apartments, shops, restaurants, cafés, movie theaters, a museum, a hotel, a...
Mori Tower at 10-1, Roppongi
Roppongi
is a district of Minato, Tokyo, Japan, famous as home to the rich Roppongi Hills area and an active night club scene. Many foreign embassies are located in Roppongi, and the night life is popular with locals and foreigners alike...
6-chome, Minato
Minato, Tokyo
is one of the 23 special wards of Tokyo, Japan. As of 1 March 2008, it had an official population of 217,335 and a population density of 10,865 persons per km². The total area is 20.34 km².Minato hosts 49 embassies...
, Tokyo, 106-6138, Japan.