Listing DIS on the TSE Second Section, and the parent-subsidiary distortion (1997)

What happens when you float the wrong side

Seen on its own, the 1997 listing was a routine promotion for DIS. Six years after its over-the-counter registration, sales were reaching $1.2B (¥141bn), and the signboard of the main market was useful for both recruiting and funding. The problem is that the stock was priced separately from the parent, and that it contained, whole, the business growing faster than the parent. So long as DIS remained an equity-method affiliate, its profit did not appear in the parent’s consolidated results, and the parent’s shareholders could not receive the fruit of the growing business in the numbers. Over the eleven years this structure lasted, the difference in value was settled not inside the group but on the side of the stock market.

What the investment fund that held 43% did in 2008 was no more than a procedure for turning that difference into cash. Daiwa Boseki arranged up to $356.1M (¥37bn) in borrowings and bought back the shares it had put on the market a little over a decade earlier. What disappeared after the buyback was not the subsidiary’s listing but the parent’s name. The corporate name carried since the 1941 merger was changed to Daiwabo Holdings in July 2009, the textile business was gathered under an intermediate holding company, and in March 2024 85% of it was transferred to an investment fund. What remained on the market was, rather, the words Yamamura Shigeru had spoken to his staff: that one day they would overtake the parent company.