Takashi Shimokawa, 56, is a staunch believer in digital technology and the potential of multimedia.

So when Nikko Cordial Securities Inc. approached him in early 2004 about a company called Livin’ on the Edge Inc., which was issuing new shares and changing its name to Livedoor Co., he saw an opportunity.

“I like using computers. I saw the limitations of conventional media in drawing out the full potential of digital graphics, and I saw how IT stocks tended to rise after new issues,” the food services firm owner said.

He bought more than 6 million yen in Livedoor shares at around 630 yen a share.

“I believed Livedoor’s core business would grow over the medium term. I was fooled, and I didn’t know if there was anything I could do about it.”

Shimokawa now heads the Livedoor Victims Association of Japan, a network of Livedoor shareholders who feel a similar sense of shock and want to know their options, now that the firm’s share price is around 10 percent of what it was.

Officially founded Wednesday, the group — the first of its kind established by Livedoor shareholders seeking compensation for stock losses — had received e-mails from 836 people expressing interest between Feb. 10 and 27.

The group is sounding out lawyers and will meet March 11 to discuss strategy.

Shimokawa was poised to sell his stocks in early January, waiting for the stock to hit 700 yen again following a brief dip at the end of 2005, after becoming unnerved by the escalating hype around Livedoor founder Takafumi Horie.

Then on Jan. 16, prosecutors made a high-profile search of Livedoor’s headquarters, seizing documents on suspected stock-rigging and false earnings reports. The sudden raid sent the Nikkei stock average into a tailspin, with Livedoor shares leading the plunge.

Over the next month, several Livedoor executives, including then President Horie, were arrested, and stock prices averaged 158 yen a share, down from an average 728 yen per share for the period between Dec. 16 and Jan. 16.

Shimokawa tried again and again to sell and cut his losses, but there simply were not enough buyers.

The e-mails sent to the victims association tell the story of a diverse group of small shareholders, estimated at some 220,000.

They range from savvy day traders, to a mother trying to earn some money for a daughter’s wedding, to a senior citizen investing his pension money, to a salaried worker hoping to earn money without his wife learning about it.

The biggest reported loss on the association’s Web site was 500 million yen: An investor bought 600 million yen in Livedoor stocks on margin (with borrowed money), investing two installments of 11 million yen and 30 million yen of his pension.

“I read in the papers that Livedoor reported a 1.6 billion yen profit,” wrote one person who said he lost 30 million yen from Livedoor shares he bought on margin. “I retired two years ago, and I don’t know how I’m going to cover my position.”

Together, the losses reported to the group total 4.36 billion yen, with stocks still held trading at 70 yen a share, according to the group.

It is considering negotiating with Livedoor management for a settlement or suing the company, its former executives and auditors.

But sympathy is hard to come by, with the notable exception of lawyers eager for the investors’ business.

The Japanese Association of Individual Investors has “absolutely no intention” of supporting or joining the victims’ group, said the association’s head, securities analyst Kiyoshi Kimura.

“Nobody in our association has reported big losses. We tell our members not to invest in companies they don’t know much about,” Kimura said. “We tell our members not to put their money into speculative stocks.”

Japan Day Trader Association director Yohei Sunada said: “I fail to see what the attraction was in Livedoor stocks in the first place. I think people are forgetting about their responsibilities as shareholders. They are the ones who voted and allowed Livedoor executives to lead the company in the first place.”

Shimokawa admitted investors are responsible to an extent for making bad decisions.

“I guess I should have acted sooner, when the company was announcing all those mergers and acquisitions,” Shimokawa said. “I should have asked myself, ‘What about the core business?’ “

Shimokawa, along with legal experts, noted, however, that the Securities and Exchange Law stipulates that once the public becomes aware that a firm falsified its securities report, shareholders can claim damages from the company, its executives and auditors.

The rationale is that shareholders determine whether to buy a stock based on the information in earnings reports. Shareholders can also file an accusation against the company for fraud, but this option is extremely complex and time-consuming, because there are no class-action suits in Japan.

“This case could open the way to a true and fair market economy, protected by regulators and the courts,” said attorney Chohei Yonekawa, who heads a team of 50 lawyers standing by to help the investors. “(Livedoor) could be the trigger that transforms Japan into a litigious society like the U.S.”

But Shimokawa said he means to hold on to his Livedoor shares. If Livedoor is delisted, he would still own a stake in the company, and may be able to bring Livedoor executives to the table to negotiate damages, he said.

“Livedoor proved Japan still isn’t ready for individual investors. We are here to make sure companies, securities firms and regulators prepare a fair and open place for us to invest.”

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