Swoop on Livedoor and Horie’s home

Japanese prosecutors on Monday night raided the offices of Livedoor, the fast-growing internet services group, and the home of its president Takafumi Horie, on suspicion of possible securities law violations.

More than a dozen prosecutors marched into Livedoor’s stylish headquarters in central Tokyo and seized documents and computers as part of an investigation into whether the group and its high-profile president misled the market in one of its many mergers and acquisitions deals.

Prosecutors were also seen filing into the private residence of Mr Horie, in a raid that was flagged well in advance by the Japanese media.

Monday night’s raid adds to the controversy surrounding Livedoor and Mr Horie, who have been both cheered as representing a new, more vibrant style of business and castigated as the ugly new face of market capitalism in Japan.

It follows a year in which Livedoor and its maverick president became household names in Japan when the group suddenly emerged with a major stake in Nippon Broadcasting Systems, a radio broadcaster, and expressed interest in acquiring Fuji TV, one of the country’s largest TV broadcasters.

That takeover battle spurred a nationwide debate on corporate governance, the pros and cons of market capitalism and led to a copycat deal by rival Rakuten, which tried and failed to gain control of TBS, another leading broadcaster.

It also highlighted a split between the old guard for whom Mr Horie represented everything that was wrong with western-style market capitalism, and those with more reform-minded views, who welcomed the shaking up of the status quo.

The acquisition under investigation by prosecutors involves Livedoor Marketing, an internet advertising company formerly known as ValueClick, in which Livedoor has a 29.3 per cent stake.

Prosecutors allege that last October, Livedoor Marketing announced it would acquire a publisher despite the fact it already controlled the company, in an effort to boost its share price. Such activity would constitute market manipulation, a serious offence, which can lead to a fine and a possible jail term.

Livedoor could not be contacted on Monday night following the raids.

The group, which has grown in a decade from a small website production company started by Mr Horie into a group with a market capitalisation of Y730bn and businesses spanning a broad range of internet services, has spurred controversy with its aggressive M&A activity.

Sales have grown from Y3.9bn in 2002, two years after it listed on the Mothers section of the Tokyo Stock Exchange for start-up companies, to Y78.4bn – a 250 per cent rise year-on-year.

This spectacular growth has been fuelled by M&A as well as a controversial succession of stock splits, including a highly unusual 100-for-1 share split in 2004.

The unusually large share split was criticised in the Japanese press at the time as a tactic to boost Livedoor’s share price.