[Update] Konami's Voluntary New York Stock Exchange Delisting No Reason To Panic
Update: Konami has provided an additional comment on the voluntary delisting from the New York Stock Exchange. The extensive statement (and analysis follow).
The Company listed its [American Depositary Shares] on the NYSE in September 2002 mainly to diversify its opportunities for fund-raising and to raise the visibility of the KONAMI brand. Since then, the Company has made efforts to enhance disclosures for shareholders and investors with the goal of deepening their understanding of the Company, in addition to complying with the disclosure requirements of U.S. securities laws and regulations, providing consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), and establishing internal controls in accordance with the Sarbanes-Oxley Act of 2002.
Meanwhile, the external environment has significantly changed as indicated by the increases in trading volume of Japanese stocks through stock exchanges in Japan by overseas investors due to the internationalization of the Japanese financial and capital markets, as well as the narrowing of the gap between U.S. and Japanese disclosure standards with respect to financial reporting due to a series of amendments to Japanese laws and regulations and accounting standards.
While the Company believes the initial objectives of the U.S. ADS listing were mainly achieved, it has judged that the continued listing on the NYSE is not economically justified, taking into account the market changes as stated above and the fact that the trading volume of its ADSs on the NYSE accounts for only a small fraction of the total trading volume of its shares. Therefore, the Company has decided to apply for voluntary delisting of its ADSs from the NYSE and for termination of registration of its ADSs with the U.S. Securities and Exchange Commission (the “SEC”) under the Exchange Act.
In summary, Konami is reinforcing our analysis (below) that continued listing on the New York Stock Exchange is not economically worthwhile any longer. With reporting guidelines becoming closer across financial markets, the Japanese reporting we receive (and will continue to see in English) each quarter provide information necessary for investors.
Konami has announced plans this month to voluntarily delist itself from the New York Stock Exchange. The first notification was made on April 1, but a follow-up statement today details timing and plans for continued trading over-the-counter.
At the time of publication, Konami stock is valued at $18.63. Volume has been exceedingly low over a three-month period, with only 2,616 shares traded on average. As a comparison, Electronic Arts has seen an average volume of 3.44 million shares over three months.
Konami will continue to be listed on the London Stock Exchange and the Tokyo Stock Exchange. Shares will also be traded over-the-counter, as they are with a number of other publishers with primary market presence in other territories. These include Square-Enix, Capcom, Bandai Namco, and Ubisoft.
As of April 24, Konami’s reporting responsibilities to the SEC (as required by listing on the New York Stock Exchange) have been suspended. The stock will be fully deregistered on July 12.
There is no reason to panic over this move. Konami will save on regulatory filing costs, as the low trading volume makes listing on the NYSE unnecessary. It would be a mistake to tie this to the ongoing mystery of Hideo Kojima’s position with the company or today’s cancelation of Silent Hills. There is no data to connect this move to either of those events.