Suspicion of misstatement regarding the disclosure of cross-shareholdings and expected sales of shares
Kyokuto reported that it holds shares of 2 companies as cross shareholdings as of end of March 2018. On the other hand, Kyokuto reported that other shares are held for pure investment and cross-shareholdings account for only 16% of all the listed shares which Kyokuto holds.
However, Kyokuto has held the fixed number of shares issued by Japan Process Development Co., Ltd. (security code 9651, hereinafter referred to as “JPD”) for 10 years. Although Kyokuto explains it hold the share of JPD for pure investment, JPD reports that it holds Kyokuto’s shares as cross-shareholdings for the purpose of “business development strategy”.
There is a suspicion of misstatement that, although Kyokuto and JPD hold each share as cross-shareholdings, Kyokuto does not categorise JPD share as cross-shareholdings. Taking this fact into account, there might be other shares that Kyokuto should report as cross-shareholdings but misstates that it holds them for pure investment.
As shown in the revision of Corporate Governance code, investors are now increasingly paying attention to cross-shareholdings. If Kyokuto misstates as above, we have to say that it’s a deceit of Kyokuto toward investors.
Sales of shares
Kyokuto states the reasons of cross-shareholdings as “being a supplier with
cooperative relationship”. We cannot understand why cooperative relationship could be developed by holding shares. A company must attract other companies via its strength in business and there is no rational that cross-shareholdings lead to business development.
In the first place, as a shareholder, we cannot overlook a company holding other companies’ shares no matter what the purpose is, whether it is for cross-shareholdings or for pure investment. Shareholders invest in a company because they expect the company earns profit from its own business, not from stock investment.
It is highly welcomed that Kyokuto sells its shares and distribute the proceeds to shareholders or invest in good opportunities for the purpose of improving shareholders’ value.