From over-the-counter to the First Section (1996)

The author’s view

Read the sequence — over-the-counter registration, then the Second Section, then the First — as the natural path of a growing company, and you lose sight of what this one was waiting for. What was judged insufficient in 1988 was not earning power but revenue, and Katayama Ichiro was in a position to manufacture scale simply by dropping his refusal to discount. That he did not, and instead waited for sales to reach ¥10bn while holding the ordinary margin near 30%, is where the character of this decision shows.

Waiting had its price. The moment the accounts were disclosed on over-the-counter registration, customers cited excessive profit as grounds for demanding discounts, and revenue for the year to November 1989 came in nearly ¥400m below forecast. Going public brought capital and credibility, but it also turned the high margin itself into a bargaining chip. Even so, when Katayama was asked in 1998 what had earned the First Section listing, he named neither a new product nor an acquisition, but an omission: that the company had not diversified and had not dabbled in land or shares. Some companies move up a market section by what they refrained from doing rather than by what they did.