Following a long summer of discontent and volatility, Internet Initiative Japan ( IIJI), a Tokyo-based Internet services provider, has found itself exactly where it was six months ago.

That was when the company was finally approaching its long-cherished dream of listing its shares on the Tokyo Stock Exchange. IIJ's March quarter had shown it posting its third-straight quarter of rising profits, putting its shares in a strong position for a debut in Japan. Cross-ownership of shares among companies remains more common than in the U.S., so a listing there would help IIJ cement ties with its customers.

Then something odd happened. The Tokyo shares were to be priced according to the level of the Nasdaq shares, which debuted in 1999. Those U.S. shares tripled over a three-week period, right up to the pricing, then plummeted again. IIJ pulled the planned Tokyo offering following what was understandably tepid interest among would-be buyers.

On Wednesday, IIJ said it was ready for another try. Its financials for its fiscal second quarter ended Sept. 30 were looking just as strong as the fiscal fourth quarter of last year. So, IIJ won the Tokyo Stock Exchange's OK to list its shares on the exchange's Mothers market. Like last time, it's basing the price of the offering on the listing expected on Dec. 2.

And like last time, IIJ shares leapt in anticipation of the listing, climbing 13% to $11.63 on heavy volume Wednesday after rising as high as $12.58 intraday -- its highest level since the pricing of the first planned Tokyo Stock Exchange listing.

On Thursday, the company's shares had recently given back almost 4% to $11.20.

Just what was the cause of that prepricing surge last May remains something of a mystery. Although it bore many hallmarks of speculative manipulation, and although it's exactly the kind of event that discourages other overseas companies from listing on U.S. exchanges, regulators never gave any hints about what caused the suspiciously erratic trading. A Securities and Exchange Commission spokesman declined to comment on whether there has been an investigation into the trading of IIJ.

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%.

In its earnings presentation, the company noted that the gains came despite increases in maintenance expenses and increased advertising. In addition, IIJ is making a larger portion of its revenue in higher-margin areas such as systems integration, which comprised 43% of its revenue but 60% of its gross margin.

Given the numbers in its most recent quarter, Wednesday's pop in IIJ's stock isn't surprising. And if the company can maintain its push into higher-margin areas of growth while keeping costs under control, there's reason to expect the stock to move higher over time.

But for the sake of its Tokyo listing, IIJ had better hope any gains in its stock price are gradual, not in another surge right before its new offering is priced. Though a second failed offering looks unlikely now, the consequences would be grim: it would send an awfully bad message to prospective investors.

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