The completion of the Atsugi plant and construction of the research lab had all of Sony astir. Soon after, however, Sony was the center of a sensation that rocked all Japan. The Japanese government had certified Sony to issue ADR stock---a first in Japan.
Simply put, the ADR, or American Depositary Receipt, was a system in which Japanese stocks could be bought or sold on the American securities market. Naturally, eligible companies had to have sound finances, ample growth potential, and possibilities of providing big earnings for future American investors.
The problems involved in selling foreign-based stock, however, were awesome. First, it was troublesome and time consuming to send stock certificates overseas, not to mention the danger of theft, rate fluctuations and currency exchange risks during transport. Second, American holders would not understand the contents of certificates written in Japanese or be able to check their authenticity. The payment of dividends and execution of other rights would also be difficult. And finally, differences between Japanese and American business practices and systems had to be resolved. The ADR system, which stipulated that an American bank would issue ADR against Sony stock deposited at their banks, would do away with all these problems and allow for foreign stock to be smoothly floated in the American market.
The general trend toward trade liberalization in progress at the time was in part behind Sony's decision to issue ADR stock. In fact, in response to this movement, Foreign Exchange Control Law regulations had been eased. Encouraged by these signs, officials from Morgan Guaranty Trust Co., the Chemical Bank of New York, and Irving Trust, among others, visited Japan one after another to try to drum up a Japanese securities investment market. These moves were welcomed by the Ministry of Finance, and in the autumn of 1960 Japan was swept up in an ADR whirlwind.
Many Japanese companies were anxious to get their stock floated in the American market via the ADR system as, needless to say, it was a powerful means of promoting their companies and product lines. In fact, over 100 companies responded to the government survey which probed for interest in the ADR program. Those selected had to be absolutely trustworthy. Corporations that might cause problems for American investors were ruled out. Only Sony and 15 other companies passed the rigorous screening by the Ministry of Finance. With a mere 900 million yen in assets, Sony was the smallest and youngest of the 16. The remaining companies, which included Toshiba, Hitachi, Yawata Steel Co., Mitsubishi Corp., and Mitsui & Co., Ltd., were all giants dating from the prewar days.
Naturally, the public reaction was  Just how could Sony do it Apparently Sony's past achievements and phenomenal popularity in the U.S. had given its future potential a higher premium than its current size. Moreover, the strong ardor with which Morita and the rest of the Sony management approached the ADR issue put an end to all doubts.
At a special board meeting on February 1, 1961, Sony's directors decided to increase capital by issuing new stock. Of this, 2 million shares would be ADR stock issued in the United States. This decision was prompted by the fact that Sony's American market was second only to its domestic market, accounting for 30% of total exports, which comprised 42% of gross sales. Additionally, the year-old Sony Corporation of America was strengthening its distribution network in this market of growing importance. The ADR venture then, would be an important means to raise awareness of Sony in the U.S.
|
