Yahoo Japan Tops JPY100M per Share, but Yahoo Cares?

The publicity surrounding Yahoo Japan's breaking the ¥100 million barrier shows clearly just how slack the reporting in the mass media has become. They missed the real story.

At its IPO in November 1997, Yahoo shares were offered at ¥2 million per share, with a face value of ¥50,000. Somewhat over two years later, the share price hit the ¥100 million mark, an achievement described in the mass media (even the Nikkei, which should know better) as going up 50-fold in just two years. But there's a problem with that statement: Yahoo Japan's stock has done two two-for-one splits twice since its IPO, one at the end of March 1999 and the other at the end of September 1999. Which means if you purchased a share at the initial ¥2 million per share price, you would, if you had held onto it, now have four shares, with a total current market value of not ¥100 billion, but ¥400 billion. So the real story is that Yahoo rose not 50-fold, but 200-fold. Plus, the company has already announced a third two-for-one split, scheduled for the end of March.

Enthralled with all those digits, reporters missed another significant angle. True, the stock has gone past ¥100 million per share -- but that's on a face value of ¥50,000. When trading opened on January 4 this year, shares of Softbank (TSE: 9984) surged past ¥100,000, on a face value of just ¥50. Why is that of interest? Because it's exactly the same multiple as the vaunted Yahoo achievement of ¥100 million per share on a face value of ¥50,000. And then there's MTI (OTC: 9438), which just listed on the OTC market in October 1999 (with a face value of ¥50,000). MTI stock had soared to nearly ¥100 million a share by the end of the year, even as the company carried out a bold 15-to-1 split at year end. That's a ¥100 million stock to dream of.

Yahoo Japan's share price has softened somewhat since then, and Internet Research Institute, whose stock had risen steadily to a January 20 peak of ¥77.41 million per share against a face value of ¥50,000 following its listing on Mothers, is undergoing a correction. There's a lot of chat now about IRI casting a shadow over this segment of the market, and about Internet stocks hitting their limit. Here, too, they -- market participants whose thinking is still stuck in the markets of yesterday -- have got it very wrong. They still don't understand how the IT revolution that will soon be upon us is linked to the equities revolution. Yahoo Japan at ¥100 million per share was barely a blip on the screen. The near future will see the rise of other new Yahoos. The trick is to be quick and accurate enough to pick them and aggressive enough to buy them early.