There are a lot of possibilities here
[Update: Konami provided us with an official statement. It can be found underneath the original story.]
Japanese publisher Konami (KNM) has delisted itself from the New York Stock Exchange. The removal took place before the market opened on the morning of Friday, April 24. The company will still remain publicly shared through the Tokyo Stock Exchange and the London Stock Exchange.
In conjunction with the NYSE delisting, Konami has also filed to be deregistered with the United States Securities and Exchange Commission. Pending approval, that will go into effect on July 12, after a 90 day waiting period.
Existing shares of Konami stock will continue to be traded over-the-counter. This isn’t an unusual tactic for foreign videogame publishers. Ubisoft, Bandai Namco, and Square Enix all operate the same way in the US. A popular reasoning behind OTC trading is cutting down on regulation fees and paperwork with agencies such as the SEC.
Often times, companies will voluntarily delist themselves from a trading marketplace if they’re in danger of being forcefully removed. It’s tough to tell if this is the case with Konami. The NYSE threatens entities that are valued below $1 per share, but Konami closed at more than $18 per share.
However, the NYSE also has thresholds in place for minimum activity. According to Section 8 of the market’s manual, a company is at risk of being considered for removal if its stockholder total is less than 1,200 and its monthly trading volume is less than 100,000 shares. Game Informer reports that Konami’s averaged only 2,616 shares over the past three-month period — well short of the 100,000 minimum requirement.
It’s easy to speculate that a financial move of this caliber forecasts gloom and doom, but that’s likely not the situation. Delisting can be an attractive move that’s designed to lure “premier” investors who will invest in great quantity. Conversely, the over-the-counter market can be an uncertain one, as there are investors who make it a rule to not trade unlisted companies, as they’re deemed too risky.
We’ve reached out to Konami regarding the logic behind the delisting, internal circumstances that may have prompted it, and if it was in danger of being involuntarily delisted. Konami’s US PR has responded, but it’s waiting for the official word from its Japanese headquarters. When that statement gets passed along, we’ll update this report.
Notice on Delisting American Depositary Shares from New York Stock Exchange Became Effective [Konami]
Konami’s official statement:
The Company listed its ADSs 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.
