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Big Market Moves for NOVA: 29% Drop in Share Price Amidst Huge Selloff on Wednesday, Over 20 Million Shares Change Hands

August 30, 2007
By Ken Worsley


Back on August 14, Japan’s largest English language school operator, the embattled NOVA Corporation, announced that it would issue 170,000 new shares on August 30. It’s August 30 right now, and at opening bell, those 170,000 new shares will be worth 5.1 million yen. 24 hours ago, they would have raised 6.97 million yen for the firm.

On Wednesday, NOVA’s share price fell from 41 to 29 before closing at 30 yen per share. Volatility was through the roof, as 20,247,000 shares traded hands. This is over forty times the usual number of NOVA shares that pass through JASDAQ on any given day.

There are currently about 65.5 million shares in NOVA that have been issued. According to recent JASDAQ filings, about 24.3 million (36%) are held by NOVA Kikaku (NOVA’s holding company), and 24.0 million (35.6%) are held by Nozomu Saruhashi, the President/CEO of NOVA. Together, they hold about 71.6% of the firm. In addition, another 4.8% is held by Saruhashi’s family members. This puts about 76.4% of the shares out of market reach - in theory.

According to yesterday’s statistics, about 30.91% of shares changed hands. Of course, some of those shares might have been bought and sold multiple times, but those who watched the market on Wednesday noticed that it was pretty much an all day selloff: 3 million shares in one half hour, a million the next half hour. They were being sold in large chunks at a time. Someone was buying a lot.

So, who’s buying? I’ve seen rumors, but I’d still be surprised if someone were to come in and buy them, though there could be good reasons for doing so.

Is Saruhashi or NOVA Kikaku selling off shares? If so, how many - and more importantly, how many can they sell before the regulators take notice? Or, is there a desire to allow the company to be saved if Saruhashi steps aside, in order to avoid the potentially embarrassing situation in which Japan finds itself with thousands of unemployed, angry foreigners looking to collect unemployment?

Will the price head up tomorrow? One might think that 30,000 yen for a 1,000 share lot in NOVA is tempting, but it’s still a risk. I’m thinking there could be a spike up, but it all depends on whether or not we hear news that Saruhashi is stepping aside, or if we find out who the mysterious buyer is.

Filed Under Equity Markets, Nova, Services 

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Comments

10 Responses to “Big Market Moves for NOVA: 29% Drop in Share Price Amidst Huge Selloff on Wednesday, Over 20 Million Shares Change Hands”

  1. malik on August 31st, 2007 5:03 am

    They’re getting bought by HSBC.

  2. ali on August 31st, 2007 9:22 am

    where did you hear that, malik?

  3. Invester Y on August 31st, 2007 12:10 pm

    HSBC? Where did you hear that?

  4. Ken Worsley on August 31st, 2007 12:45 pm

    I call BS on that. There’s no evidence whatsoever.

  5. df on August 31st, 2007 6:19 pm

    Highly doubtful. Can you give your reasons for thinking so Malik?

  6. Ron on September 2nd, 2007 9:35 am

    Wouldn’t a buyout by a major corporation take place in an after hours stock trade where the stock price would remain fixed instead of a long slow sell off over a three day period?

  7. Ken Worsley on September 2nd, 2007 1:06 pm

    Ron: The volume might be lower in after hours sessions, but I’m not sure what makes you think the price would stay fixed. If it’s being sold, it’s being sold, and that’s downward pressure on price no matter when it happens.

    A controlling stake couldn’t have possibly been purchased in a single after hours session because a tender offer would have to have been made once the buyer gets up to about 20%.

  8. Ron on September 2nd, 2007 4:22 pm

    Ken: Thanks for the explanation. That was a question that was put forth on one of the Internet message boards discussing the same topic and so I thought I would post it here where there was a better chance that someone would probably know the answer. Thanks again. You have clarified the situation a bit more.

  9. Jism Spackler on September 4th, 2007 12:11 am

    You douchebags need to get a life,
    but first find new jobs. I’m the
    secret buyer and you’re all fired.

  10. Ken Worsley on September 4th, 2007 12:18 am

    You’re not cool.

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