A Japanese technology company mired in an accounting scandal said on Monday that it was seeking court protection from creditors.
IXI, a computer systems consultancy with interests in the video game and aviation sectors, admitted that its executives may have concocted fake trades and been involved in other irregularities. The group said the revelations made the prospect of remaining listed on the Tokyo Stock Exchange “very problematic”.
The announcement hit IXI’s shares, which fell 18.3 per cent on Monday. Although the market has been aware that IXI had problems, one fund manager said that as recently as last week the company was strongly playing down the prospect of any serious problems.
“I know a lot of people are very, very angry about this,” said an institutional investor. “The fact is that the issues that have come to light date back several years.” The investor said IXI’s accounting problems were apparently missed during the due diligence process when a controlling stake in the company passed from IT consultant CAC to technology group Internet Research Institute last year.
IRI, which now derives about 65 per cent of its profits from IXI, saw its shares fall 14 per cent on Monday. The company said it would book an extraordinary loss of Y14.38bn ($118m) on its IXI holding and that it was considering legal action.
An audit by Ernst & Young ShinNihon of IXI’s results for the year to the end of March 2006 brought the irregularities to light. IXI was asked to refile its earnings report by February 4. Over the weekend, it became clear that IXI could not meet that deadline and would face delisting.
IXI said delisting would probably trigger a sudden rush of demands that it pay back substantial debts. In addition to Y11.9bn in borrowings on its books, IXI said it could be responsible for another Y10bn in debt.