Listing non-voting Class 1 preferred shares on the Tokyo Stock Exchange (2007)

Can a price be put on a vote?

This capital policy is an instance of a listed founding-family company confronting, as a matter of instrument design, the tension between wanting money and not wanting to hand out votes. The purposes ITO EN itself gave were widening its funding options and offering shareholders a new investment vehicle; it did not cite the preservation of control. Even so, since the mechanism thickened equity without adding a single voting share, it plainly sat comfortably alongside a structure in which the founding family continues to run the company.

The market’s answer differed from the designer’s expectation. Even with a dividend 25% higher, a thinly traded share is valued 20% to 40% below the ordinary stock. A security created as an experiment in pricing the vote ended up, one might say, pricing liquidity instead. Raising money through non-voting shares is a question that recurs in debates on corporate capital policy in Japan; the price history of this issue, which ITO EN has now carried for close to twenty years, leaves that debate a concrete piece of evidence.