Wednesday, September 1, 2010

Own Mizuho Bank or TV Tokyo Shares? Sell Now While You Can!

By Mike in Tokyo Rogers

"The management of that company couldn't properly run a fruit and vegetable stand." Kazuo Inamori - Chairman of JAL and founder of Kyocera said when he fired the entire Japan Airlines Upper Management staff in early 2010..

I've written before about how there's no way out of the hole for companies like TV Tokyo; they are quickly heading for bankruptcy. The Chairman of TV Tokyo, the president and the entire management team, needs to be fired immediately for incompetency and for running TV Tokyo into the ground. Management like these people clearly have sold out the future of the TV station in order to prop up short term financial goals so that he and his cronies are able to get full retirement benefits.

(Note: Under the rules of any Nikkei-related company - of which TV Tokyo is one - the president can only reside in his position for 6 years and then is forced into retirement. The current president is 3 years into his term. All he needs to do is float the company for three more years and he gets his full retirement package. Hence, I suspect, a huge motivating factor in taking out a huge loan that can never be paid back. He has sold the future of the company and all its staff up the river so that he can have a good retirement package. The employees and shareholders should be up in arms.) 

Short-term thinking and immediate gratification are no way to run a company. TV Tokyo's balance sheet shows the proof in this. TV Tokyo group is currently losing around $40 million dollars cash a year.

Short term thinking and goals are what has gotten TV Tokyo into the mess it's in and there's no way out now short of radical changes in management - if it's not already too late. Like I said, at the least, the current management needs to be fired immediately and replaced with someone who has at least some new ideas on how to run the station. At this rate, with the digital conversion just around the corner coupled with the collapse of the Japanese economy, TV Tokyo isn't going to make it another 5 years.

The most alarming part of this picture is that, in order to stay afloat, TV Tokyo group, in February of this year, borrowed... are you ready for it? About $5 billion dollars from Mizuho Bank in order to be able to continue with the running of day to day affairs. Five Billion US Dollars! That's $5,000,000,000.00! This is a $5 billion dollar loan taken out by a company that is losing $40 million dollars a year.

Evidence of this loan showed up in TV Tokyo's balance sheets after their shareholder's meeting ended in February. Considering that TV Tokyo is losing money, and has been losing money for the last few years, taking this loan out - without a solid business plan for making money - or paying the loan back - is suicide. 

This is plainly insane. The only people who could be stupider or more insane than the person who took out this loan is the people who would loan this money. That brings me to the real criminal idiots in this mess: Mizuho Financial Group (MFG).

MFG took this money - not theirs mind you, their customer's money - and lent it out to a company that is basically insolvent. That is just plain irresponsible and bad business.

Why would MFG lend this money to a company that they know is losing so much money and has no way of paying it back? Well, for so many years in Japan, it was believed that the Japanese government would never allow a broadcasting station to go bankrupt. And they never did before... Well, not until this year. Earlier this year, the broadcasting world in Japan was turned on its head when a major FM radio station in Nagoya, Radio-I, went bankrupt and the Japanese government didn't step in to stop it.

It's probably due to the fact that the Japanese government has already spent the public into debt and obligations that already equal over 190% of GDP... The fact of the matter is that there is no more money left in government coffiures anymore. The piggy bank is broken and there's nothing left.

So, besides telling you, once again, that TV Tokyo is a dead-horse, I'd like to warn you about one of Japan's biggest banking firms, Mizuho Bank. Or, more specifically the Mizuho Financial Group (MFG).

Wikipedia writes about MFG:

It holds assets in excess of $1.44 trillion US dollars through its control of Mizuho BankMizuho Corporate Bank, and other operating subsidiaries. The company's combined holdings form the second largest financial services group in Japan. Its banking businesses rank the third in Japan after MUFG and SMFG, and the ninth in the world by market capitalisation as of Nov 2009.[1] It is the 59th largest company in the world according to Forbes Global 2000 rankings. Its shares have a primary listing on the Tokyo Stock Exchange.

This sounds all dandy, but I have some information today to share with you that should warn you about this company; the Mizuho Financial Group is so deeply intertwined with TV Tokyo that they've gotten themselves into a huge jam and can probably never extract themselves from it... This is going to cause them to write off, or take pennies on the dollar, for a $5 billion dollar loan that they gave to the TV Tokyo group. This is a loan that TV Tokyo is not paying off, nor can they ever pay off, as the TV Tokyo group is losing money. How could they possibly pay it off?

Maybe MFG was hoping that the Japanese government was going to bail out their loan like the US government did with the US banks and automakers. Fat chance. 

TV Tokyo will not be able to make their first payment and will have to roll over this loan next year. Considering their business state and the state of the Japanese economy, how many years will they be able to continue to roll over this loan? I doubt that they can do this for more than a few years.

When MFG calls in the loan, it's game over for TV Tokyo. Game over for TV Tokyo will seriously damage MFG share prices too. What will happen when their $5 billion dollar loan is sold for pennies on the dollar?

Both companies share prices are in serious trouble as it is. Three years ago, TV Tokyo shares sold for about ¥4,440 each (calculated at today's rate of about ¥85 to $1 USD). Today, TV Tokyo shares sell for ¥1540 (about $18.30) a drop of 66%. That's bad, but MFG shares have done even worse dropping from a price of about ¥1,100 (about $13.06) three years ago to ¥401 today (about $4.75 each). That's a 77% drop in price. 

It's hard advice to swallow if you own shares in either TV Tokyo Group or MFG.... You've already lost a bunch of money as it is... But considering the above information, it's not going to get better.

If you own MFG shares or TV Tokyo shares, then take your lumps. Face the ugly facts: You lost money. Get out now or you will lose even more.


Keywords: JAL, TV Tokyo, Mizuho, MFG, Kazuo Inamori, 

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