The ADRs of Nikko Cordial (OTC:NIKOY) had largely recovered recently. But expect them to sink again. News broke in Japan that an inquiry has blamed Nikko management for a fraud that may cost the company its Tokyo stock market listing:
Shares of Nikko dropped by their maximum 200 yen limit to 1,184 yen today, after the Tokyo Stock Exchange said it will use the probe's findings to determine whether to delist the company. The stock probably will fall further as sell orders outweigh buy orders by 60 to 1, according to data compiled by Bloomberg.
I'm not dumping my ADRs. I wouldn't recommend anyone selling their Nikko Cordial ADRs or ordinary shares (if they bought in Japan). If you follow my posts, you bought Nikko at a great price back in 2005, and took partial profits later.
I first thought the company wouldn't get delisted. Now I'm wondering if a delisting followed by a HUGE stock price plunge would prove to be an excellent buying opportunity. It would depend on the value of the business remaining intact, scandal aside. Let's stay tuned.
UPDATE: The shares have plunged -- because of a probe implicating former executives in an accounting fraud that may cost Japan's third-largest brokerage its stock market listing.
You know I own the ADRs trading OTC here in the US. They ended yesterday at $8.70. The ADRs were recommended in May 2005 at $8.64 (adjusted for a subsequent 5-for-1 ADR split). I sold one-third of my position in March 2006 at $16.30.
But with Nikko Cordial's price tanking, things are getting interesting. This Bloomberg report contains a nugget of noteworthy speculation:
The resulting decline in Nikko's shares has made the 89-year-old company a potential takeover target, said analyst Hiroyuki Maekawa. "Companies from foreign and local banks to buyout funds must be paying close attention,'' said Maekawa, a Tokyo-based analyst at Deutsche Securities Inc. who has a "hold'' rating on the stock.
I read a wire report saying the government decision on delisting the company from the Tokyo Stock Exchange will come in March.
For me, the decision is whether to hold or add to the position. I'll post here any moves (or non-moves) made.