SBI Accumulated 38% for the Plummeting Drug Venture Shares. The Authority Acted on Wild Fluctuation.
July 20, 2016
In July 2016 issue, we wrote on wild stock price gyration of Acucela Inc., a drug discovery venture publicly traded on the Mothers Section of the Tokyo Stock Exchange. "Acucela has no future, what would you do, Mr. Kitao?" we concluded the article. A reaction was spontaneous. On June 30th, Yoshitaka Kitao, the President and Representative Director of SBI Holdings sent a protesting letter to FACTA. We received many such registered mail letters from Kitao in the past, but this time around, the letter did not include name of lawyer, and the address was badly handwritten. His home address in Chiyoda-ku was also written in the envelope.
We returned a registered mail letter to the address deemed as Kitao's home on 7th, July, proposing an interview, if the protest was Kitao's personal initiative, and called the office the following day on 8th. The one Mr. Ozawa of SBI's General Affairs Department said; "we will go over", on the interview, but after that, he gave no reply.
Kitao may be furious. He has been seeking lifeline in biotech, having high hope on Acucela as a glittering golden egg. Prior to the share price started the stop-loss streak on July 26th, he bombastically twittered in April 26th, that "it could grow to more than 10 billion dollar drug, the biggest among ophthalmology drugs". The turnover of Acucela was barely 3 billion yen last year, but his ambition imagined Acucela would generate 1 trillion yen annual sales.
In the SBI's shareholders meeting held in June 29th, Kitao's irritation was obvious. With Acucela shares plummeting, SBI share price also got a hit. The reason was clear, as the second largest shareholder SBI further accumulated Acucela shares in June. SBI's shareholding ratio, 21.07% before the sudden collapse, grew to 37.93%, according to the large shareholding report submitted to the Financial Services Agency ("FSA") in June 30th. We thought SBI may tender, but all the purchases were in fact made in the market.
What was the clue of this accumulation? The amount SBI thus far invested reached 25 billion yen. Was there any clue worth such an amount?
Termination of co-development with Otsuka Pharmaceutical, postponement of shareholders meeting to October, changing domicile from U.S. to Japan by triangle merger turned void; it seems there were no good news justifying accumulation. Yet, as the large shareholder accumulating more, small investors may guess there is any "special information only big shareholder can obtain".
In the SBI's shareholders' meeting, attendants asked more on Acucela than on SBI. One person questioned on a criticism about Kitao's tweets to cheer up the share price, how he thinks on the reputation risk, and how to secure exit for 30% plus Acucela shares.
As questions relating to Acucela continued, Kitao's response exuded displeasure. He said that he just re-tweeted publicly available information, and did not add his judgment, and even referred to our article. "Recently, in FACTA's article, there was a suggestion that insider information only available to management of the company was disseminated, but I just re-tweeted a report published by FISCO in April 26th. Therefore, I have not disseminated insider information. I only make remarks based on legal scrutiny, and I won't say something bogus."
Also, he said that he sent directors to Acucela as an equity-method affiliated company, and considering collaboration with other drug discovery venture but no clear exit strategy was shown.
In the end, as his irritation culminating, he glared to the meeting room, as if not allowing any more questions on Acucela, and sulkily concluded: "Please be considerate on questions only in line with agenda of the meeting!"
Yet, SESC has identified SBI as the most important inspection target for this fiscal year. They are checking and reviewing Kitao's tweets, reactions of his followers reaching even thousands per day, and stock price movement very carefully. On the other hand, they pay close attention to the connections of Ryo Kubota, the President and CEO of Acucela. In fact, the stock price started to plummet one day before the company announced the failure of clinical tests. SESC is investigating who was responsible for the leak, and who were involved in share sale based on that information. SESC and Japan Exchange Group ("JPX") fear Kubota himself or Kubota's acquaintances might have been the origin of the leak.
Ryo Kiyota, the CEO of JPX enunciated in a press meeting that Acucela is in middle of review, and showed grave concern on SBI's share accumulation.
Withdrawal of Speaker at Mita-kai
In the end of May, Kubota was back in Japan from the U.S. The SESC traced his footprints, and listed up his contacts in Tokyo. After the clash, Kubota cancelled a speech at Foreign Correspondent Club ("FCCJ") in Tokyo. Kubota is a graduate of Keio University Medial School. He received "Suda Award" by finding MYOC, a DNA causing glaucoma. He is a M.D. specialized in catalyst and glaucoma, served as an associate professor in Washington University at Seattle. To be invited as a guest speaker in Rengo Mita-kai, the reunion festival of Keio graduates held once a year in Hiyoshi Campus in Yokohama must be a great honor for him. Mita-kai is the strongest reunion network in Japan encompassing regions, industries, and companies, and thus great opportunity for venture startups to raise money. It provides a great chance to firm up connections. Kubota was invited as the guest speaker of Medical School in October 16th this year, but he turned down the invitation in June.
What happened? Acucela still has some other pipelines for drug discovery. Only one failure in drug for age-related macular degeneration occurred. But his disappearance from public may imply much more. SEFC's review will further intensify.