a Gree (3632:JP) listing in the US?

…possibly, according to Bloomberg.  The move makes sense to me.  But we’ll have to wait and see.

The social networking business is almost entirely cellphone-based in Japan.  It’s dominated by a small number of companies, including Gree and DeNA (2432:JP) (I own them both).  It’s also maturing, which is why Japanese firms are expanding in to China and the US.  They are also starting to buy mobile game companies in the West as a way of getting exclusive content for their networks.

Why list in the US?

Two reasons, both related to merger and acquisition opportunities:

–right now, the only real option either company has in approaching, say, a US game company is to offer cash.  Shares listed on an exchange that’s still less than a third the high-water mark the main indices reached 23 years ago, and linked to an economy that’s been moribund for the same period, aen’t going to be very attractive.

–a US listing would likely raise Gree’s profile (or DeNA’s, for that matter).  My experience is that the internet sector in Japan is not well understood by investors.  I’m not sure why.  Despite the fact that Gree is profitable, cash-generative and growing extremely rapidly, it’s trading at under 20x earnings.  That’s less than YHOO or EBAY in the US, and about 40% of the multiple of its (slow-growing) personal computer-oriented rival, mixi (2121:JP).

A US listing might also boost Gree’s PE–it certainly can’t depress the current mid-teens value–and increase prospects for price appreciation.  The former would make the stock more attractive to management to use as acquisition currency, the latter would make it more attractive to shareholders of potential targets.

are the financials reliable?

In many ways, financial disclosure in Japan is more detailed than in the US, and at least as reliable.  It’s certainly way better than anything you’ll find in Europe, or elsewhere in the Pacific.  The one drawback for a foreign analyst is that it’s all in Japanese.