Livedoor stockholders to sue for compensation

About 1,000 Livedoor Co. shareholders will launch a damages suit in late May against the Internet firm and its former executives to recover their losses from the sharp fall in its stock price following allegations of accounting fraud, their lawyers said Thursday.

These shareholders are expected to seek 4 billion yen to 5 billion yen in damages, the lawyers told a news conference.

The lawyers also said about 740 Livedoor shareholders have reported an average loss of about 4 million yen, including 60 to 70 people who estimated losses at 20 million yen or more each. The largest individual loss came to 600 million yen.

The lawyers said they have received inquiries from about 3,200 Livedoor shareholders about damages suits and sent documents to 1,200 of them.

Thursday’s move came after the stock ended its final day of trading on the Tokyo Stock Exchange at 94 yen, down 7 yen from the previous day.

The firm will be delisted from the Mothers market Friday over allegations of accounting fraud.

Livedoor stock was fetching about 700 yen earlier this year, but tumbled after prosecutors raided the firm’s Tokyo headquarters on Jan. 16.

Its market capitalization, which topped 800 billion yen in December, plunged to about 98 billion yen, based on Thursday’s closing price.

Livedoor will end its time as a listed firm only six years after debuting on the TSE’s Mothers market for startups as Livin’ on the Edge Inc.

Thursday was also the last trading day for Livedoor Marketing Co., a Livedoor unit that is also accused of cooking its books.

Livedoor Marketing ended its final day on the Mothers market at 310 yen, up 34 yen from Wednesday, ahead of its delisting Friday.

After going public in April 2000, Livedoor, which took its current name in February 2004, grew rapidly through active equity swaps and share splits. But the accounting fraud scandal and the delisting are expected to make fundraising difficult.

Livedoor may be asked to pay huge damages for losses caused by its share price plunge to both individual investors and former partner Fuji Television Network Inc.

The key to whether Livedoor can overcome the scandal and go public again lies in the prospect of a tieup with Japan’s biggest cable broadcaster, Usen Corp., which was announced in mid-March, analysts said.

The Tokyo bourse decided last month to delist Livedoor because of suspicions it disclosed inflated group financial figures in the business year through September 2004.

The delisting decision was made after the Securities and Exchange Surveillance Commission filed a new criminal complaint against Livedoor, former President Takafumi Horie and four others over alleged securities law violations.

Livedoor has been charged with reporting a consolidated pretax profit of 5.03 billion yen for the year to September 2004, when it actually incurred a pretax loss of 312.78 million yen.

Trial may start May 26

The Tokyo District Court will start legal proceedings against four of the five former Livedoor group executives indicted on charges of securities law violations on May 26, sources close to the matter said Wednesday.

The court has decided to delay the trial of Takafumi Horie, founder of the once high-flying Internet services firm Livedoor Co., and separate it from the proceedings against the other four.

Horie has denied the charges, which include accounting fraud and disseminating false merger and acquisition information to boost share prices.

The four other defendants are former Chief Financial Officer Ryoji Miyauchi, former Representative Director Fumito Kumagai, former director and Livedoor Marketing Co. President Fumito Okamoto, and former operating officer and Livedoor Finance Co. President Osanari Nakamura.

Prosecutors say the four have admitted to the allegations.

The trial of the former executives is expected to get into full swing in July.

The five and Livedoor itself are accused of doctoring the parent company’s financial figures for the year through September 2004 to make it appear the company earned a group pretax profit of 5 billion yen instead of a pretax loss of some 300 million yen.