A group of U.S. investors filed a class action suit Monday with the federal district court in New York against Japanese Internet service provider Crayfish Co. over losses they incurred due to the firm's alleged failure to disclose sufficient financial information.
The lawsuit says Crayfish, which made its debut on the U.S. Nasdaq market in March, failed to notify investors of the susceptibility of its profitability to the fate of its parent company, Hikari Tsushin Inc., Japan's biggest subscription agent for mobile-phone service providers.
Hikari Tsushin found itself in serious business problems earlier this year, with its shares coming under relentless selling pressure. It closed 1,050 of its 1,800 retail outlets in the six months to July.
Several U.S. law firms representing the investors said Crayfish, in listing its shares on the Nasdaq market, called investors' attention to its capital alliance with Hikari Tsushin, which made Crayfish into a subsidiary in March 1999, but failed to alert investors to the connection between the company's own profitability and the business performance of Hikari Tsushin, in violation of the U.S. Securities Exchange Act.
Hikari Tsushin said in April that it expected an operating loss of 11.6 billion yen for the business year to Aug. 31, instead of an earlier projected profit of 8 billion yen.
On the Tokyo Stock Exchange on Monday, Hikari Tsushin shares finished at 4,620 yen, down 110 yen from Thursday. The market was closed Friday for a national holiday. They hit a record high of 241,000 yen on Feb. 15.
Crayfish shares are also being traded on the TSE's Mothers market for startups.