As Japan Airlines faces bankruptcy, many of its shareholders have been shell-shocked by the prospect of being completely wiped out.
That's because many Japanese companies have been considered 'Too Big To Fail' in the past, or more aptly 'Too Japanese To Fail.'
WSJ: JAL is scheduled to file for bankruptcy following Tuesday's 3 p.m. Tokyo stock market close. Individual shareholders, who accounted for 60% of JAL's 2.73 billion outstanding common shares as of September, will be the hardest hit by the possible subsequent delisting of the airline's stock, which has plunged from a peak of 200 yen ($2.20) last January to a close of 5 yen on Monday.
Hidetaka Miyai, 34 years old, works for a mobile-phone content provider and spent 500,000 yen to buy 1,000 shares at around 500 yen apiece several years ago. "My purpose to hold JAL shares was purely to get discount coupons," he said. Twice a year, the airline issues flight discount vouchers to shareholders, which make the stock attractive to individuals. "I just missed the timing to sell them," he said. "I didn't think JAL would be facing the risk of delisting because it's the national flag carrier, isn't it?"
Support for 'national companies' extends far beyond Japan, even if Japan is an extreme example. China has droves of government controlled companies, and many investors put blind faith in the Chinese government's ability to protect them and boost share prices with asset injection hand-outs.
Europe has its corporate holy cows as well. It's widely assumed Deutsche Bank would be supported by the German government for example. We barely need to mention the U.S. these days. The financial crisis unearthed a whole host of ultimately government-back-stopped companies.
Now, for a long time the above assumption works. Private shareholders repeatedly dump their companies' mistakes onto the taxpayer and are saved by the public purse. But eventually, even governments have their spending limit, once debt burdens reach mammoth proportions.
That's what's happening in Japan. Had it been better days, when the Japanese government had less debt, a JAL bailout would have been a done deal and easy to pass onto the taxpayer. Yet today even the historically docile Japanese taxpayer is growing intolerant of such irresponsible and unjust government behavior.
Thus Japan is beginning to show us how the false assumption of Too Communist To Fail, Too Nationally-Endeared To Fail, or even just Too Big To Fail can unwind. Suddenly, all Japanese companies appear far less stable than previously assumed. Anyone who bets on government support for their investments pay heed -- As government debt around the world explodes ever higher, your days are numbered.
Add my twitter feed: @vincefernando
Join the conversation about this story »
See Also:
Following a couple of weeks of taunting and teasing the new Meriva, German carmaker Opel released yesterday more details and a lot of photos of the versatile people carrier. Although details regarding the engine choices are still to surface, Opel has detailed all the "Flexes" it associated with the car: FlexDoors, FlexSpace, FlexRail and FlexFix.
WBBM-TV reports: An Amtrak passenger train slammed into a small white sedan on the tracks in downtown Lemont Monday afternoon. Just moments before the collision, rescuers pulled a woman – a Roman Catholic nun — from that car, which had been disabled on the tracks.
Those of you with Verizon FiOS accounts will be happy to learn of a new application for Android handsets. The free app offers similar functionality as the mobile website from Verizon such as parental controls, video on demand (VOD) browsing, program DVR remotely, search TV programming and much more!
