The March 19th edition of the Toyo Keizai magazine reports an embarrassing situation for G.communication.
According to the article (see attached PDF), G.com was looking to raise to some money last October, so it sought financing from Yohohama-based BOW Networks and put up a sizable chunk of its shares in G.Taste, G.Networks, and Yakiniku Saki as collateral. The shares amounted from around 4 to 10 per cent of G.com's issued stock and had a value at the time of about 500 million yen.
When G.com never got its shares back, they realized that something was wrong. The office that BOW Networks had near JR Shin-Yokohama Station was empty. The landlord said that they were four months behind on their rent. Registered mail sent to the president's residence was returned marked, "Unknown address."
Who are or were BOW Networks? The company was set up 20 years ago in Miyazaki Prefecture and originally sold golf equipment. The company moved its headquarters to the Kanto area 11 years ago and apparently has been dealing in security devices ever since.
Why would G.com go to them for half a billion yen? When G.com took over Nova and started expanding its business, it became a member of the Incubator Bank's small and medium business network and used it to finance its growth. But when the bank collapsed last September, it needed to find another backer.
Initially, Hanshin Shuhan, a Kobe-based liquor distributor, was named as a potential sponsor. While Hanshin Shuhan apparently liked to tout itself as a mover and shaker, the reality was that it had little money. Even though it acted big in putting up Asrapport Dining's (a JASDAQ-listed company it owned) shares as collateral and applied for 400 million yen from the Incubator Bank, the company was just barely scraping by.
So it comes as no surprise that talks between G.com and Hanshin Shuhan fell apart at the end of last year, and now someone has absconded with G.com's shares. G.com is apparently refusing to divulge any further details about what happened, but Toyo Keizai wonders if the breakdown in talks and missing shares aren't connected somehow.
Comment: There you have it. G.communication is the largest eikaiwa in Japan after snapping up Nova and GEOS, but it apparently gambles with its money and associates with shady businesses. Isn't that comforting to know? Then again, as I've talked about often here, poor management isn't just a failing of eikaiwa, it's a feature.