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Drecom Update 2/17 February 17, 2006

Posted by fukumimi in IPO, Japan.

Drecom closed at JPY5.62million, up 2.74%, valuing the company at JPY111.2billion valuing the company at approximately $940million. To reiterate, the company had profits of approx $0.5M on sales of $2M for the year ending March 2005. PER is above 900. Anyone for a $1B cap and PER in 4 digit territory?

Drecom raised just $15million from shares floated at 2000shares@JPY0.76M…


1. Gen Kanai - February 20, 2006

When this company implodes, many of these investors who got in after the IPO will be bit hard. Please keep an eye on Drecom for us.

2. fukumimi - February 20, 2006

Seeing that investors who bought Drecom on the open market have done so at a price north of JPY5M, anyone who got in at that level and is in possession of shares when the shares go south is likely to be subject to a significant hit. However, seeing there are only 2000 shares on the market, and with the entry barrier being pretty high, I suspect the average investor isn’t going to be affected too much if they don’t play above their league.

There is significant volatility, with the price fluctuating by nearly JPY2M in a single day on friday, and the danger is if novices have bought a share or two at friday’s highs, they might be tempted to hold on rather than realise a loss of JPY1.5M per share. (I’m guessing a loss of more than $10k is significant to the average individual investor)

I do wonder who got an allocation from the IPO though, they’ll have made a quick buck.

The first trade this morning was a chunk of about 250 shares at JPY4.62M which was JPY1M lower than friday’s closing price, but even at that price, even if it was an IPO allocation block that would amount to approx $8M profit. If it was an insider (read CEO) divestiture, approx $10M.

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