Internet Initiative Japan's Pull and Push in Public Markets

Bad news has dogged every stock offering that IIJ has been involved with. Its Nasdaq shares proved volatile, even by the standards of the dot-com boom and bust. They rose as high as $123.50 in February 2000, then fell as low as $1.41 in April 2003. That marked a 99% drop from IIJI's record high and a 94% discount from the value that the underwriters had accorded IIJ in the offering. (IIJ's stock is still less than a third of its offering price.)

That lackluster performance led to a shareholder lawsuit that alleged that underwriters "laddered" the offering -- that is, they allowed investors in on the IPO on condition that they would buy more shares in the aftermarket to ratchet it higher. A settlement that released IIJ and underwriters from liability paid as much as $1 billion in recoveries, which was paid by insurers.

IIJ fared even worse with the IPO of Crosswave Communications, a joint venture of which IIJ owned 40%, with the remaining ownership split between two partners, Sony(SNE) and Toyota. Crosswave, which is set up to sell broadband access on a brand new fiber-optic network, listed on Nasdaq at $14 per ADS in August 2000. It was delisted two years later as the company filed for the equivalent of bankruptcy protection in Japan.

Crosswave's assets were eventually transferred to Japanese telecom giant NTT Communications, a subsidiary of Nippon Telegraph and Telephone(NTT). Around the same time, NTT injected $13.3 billion into IIJ in exchange for 15,880 shares, a transaction that boosted NTT's stake in the company from 6% at the time of the Nasdaq IPO to 32%. The 5 billion-yen deposit ($45 million at today's rates) that IIJ put down to secure a 15 billion-yen bank loan for Crosswave was lost.

Suzuki has said repeatedly that IIJ's financials are on the mend -- the company went from several years in the red to a profit in the fiscal year ended March 31, 2005 -- and that he's intent on pushing margins higher. If so, the company could break its string of unlucky listings and finally win a warm welcome on the Tokyo exchange.

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