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Internet Initiative Japan's Pull and Push in Public Markets

Say one thing for Internet Initiative Japan (IIJI): It really means it with that word "initiative."

After pulling a long-desired stock offering from the Tokyo Stock Exchange only a few days after it priced, the company is vowing to get listed in Japan. CEO Koichi Suzuki said in an interview with Reuters last Friday that IIJ is undeterred in its goal of having the stock trade in its native country. A Nasdaq listing, it seems, isn't enough.

Actually, the Nasdaq listing could be seen as a liability. In a reaction that must have been greeted with mixed feelings by Suzuki & Co., IIJ's Nasdaq shares rallied madly on the news, rising 23% in a single day Monday. The stock further climbed as high as $8.7 Tuesday before closing unchanged.

IIJ and Daiwa, the lead underwriter of its failed Japanese offering, made the fatal error of pricing the offering in the midst of a manic rally in the Nasdaq shares. That inflated the price of the Japanese offering to the point where nobody wanted to buy it. The Japanese shares would be priced at a 6% discount to the close of IIJ's Nasdaq shares on June 13. Those shares stood at $13.90 at the close.

Worse for IIJ's Tokyo offering, the Nasdaq shares began tanking the next day. So institutional investors were presented with a less-than-enticing bargain: Buy shares in the Japanese offering for roughly $13 a share, or buy the Nasdaq shares for between $10 and $11 a share, which is where they were trading when underwriters began shopping the Tokyo shares around.

In business since 1993, IIJ has found the golden ring of a Japanese listing hard to grasp. Finding the public market unwelcome in the midst of a prolonged Japanese recession, IIJ listed 7.16 million American depositary shares on the Nasdaq in 1999 for $23 a share. Goldman Sachs and Morgan Stanley, two of the most respected underwriters of the late '90s, co-managed the offering.

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