Internet Initiative Japan Shares Give Encore

There is one sign, however, that regulators may have curtailed some of that speculative trading. Last spring, IIJ had been a longtime frequenter of Nasdaq's threshold list. Stocks appear on an exchange's threshold list when a short-seller fails to deliver shares to the buyer within the standard settlement period for five straight trading days.

But on Oct. 24, shortly after reports began spreading that stock regulators were enforcing an unannounced deadline to settle or buy back delivery failures, IIJ dropped off the threshold list. And it hasn't been back since.

IIJ has reason to hope for success now. Its announcement for the listing said "the underwriters may conduct stabilizing and other activities in connection with the offering, in accordance with applicable laws."

Still, IIJ's stock is already showing the kind of gains that its aborted Tokyo offering brought about last May. The stock has gained 36% in the past three weeks. And volume in the last five days has been 4.7 million shares a day, more than 8 times the average daily volume of the previous three weeks.

A good deal of that gain, however, was tied to IIJ's strong fiscal second-quarter earnings. Revenues grew 14% from the year-ago quarter to $105 million. And profit grew more than four times to $1 million.

Some of the gains in net income this quarter were rendered larger because in 2004 IIJ was still writing down losses related to its investments from the dot-com era. Even so, its operating income rose 80% to $4.5 million.

IIJ's profit margins also showed significant improvement from the year-ago quarter. Operating margin grew to 4.3% in the quarter ended Sept. 30, up from 2.7% in the year ago quarter, while gross margin expanded to 17.2% from 15.8%.