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What’s funny about Rakuten? There is tremendous!
Stock Price almost one-third in these 5 years
Rakuten used to have its stock price of roungly JPY 2,500 in the early 2015 but it is JPY 778 as of today, March 2020. There are several reasons that caused this tragedy so let us pick up some interesting reasons here.
Huge Gap between own valuation and market’s valuation
There are many funny stroies around Rakuten all the time but this huge discrepancy of roughly $40 Billion between Rakuten’s own valuation and their market cap is well representing their problem.
It reminds me of the terrible fight between HD-DVD & Blue-ray which happened more than a decade ago. In the later phase of this war, HD-DVD team was calling out some tricky numbers like “bundling sales ratio” to conceal the defeated reality. Likewise, Rakuten is explaining their “growth” by calling out the increase of “membership value” according to their own definition. This membership value is indicated with gray color in the graph here while the dark-blue is true market cap. They are claiming that they calculated this membership value by refering to the growing cross-use ratio of thier multiple services.
Overview of the Competition Landscape
EC Competitors
The landscape of EC industry is getting more and more competitive. Not only Amazon and Yahoo, but also the shop builders like Shopify is now so easy-to-use that merchants are able to examine departure option more easily. Having own online shop is quite a challenge but it gives them full control over their own brand and of course no longer need to pay commission!
payment competitors
Rakuten has their own payment method that is named “R-pay” but that competition is indeed a red ocean. LINE and Softbank are now merged and getting more & more aggressive in user acquisition.
Rakuten launched their telecom network as an experiment and then ended up with huge outage in December 2019..
time to launch the recovery plan?
Ok! Then, how to increase this super-cheap stock price by getting more trust from the market? Their final attack plan is now with the launch of new MNO (Mobile network operator) in Japan! Mobile number subscription in Japan is way more expensive compared to Europe and actually other MNO is making significant profit. If Rakuten could get some sezeable market share, that would be a very great success!
Challenge for the world’s first “Cloud-native” Platform
Rakuten is claiming that they have plan to deploy world’s first “cloud-native” telecom platform that utilize the fully virtualized server instances. It indeed sounds like a big challenge.. and offering super cheap plan compared to the existing Japanese MNOs. (Rakuten offers JPY 2,800 per month with roughly 10GB data communication)
It sounds exciting enough and I believe everybody is paying close attention on it !
Rakuten is claiming the platform is “simple, agile, and disruptive”.. hope that word is true 🙂
Author: Rodorigo. J Tani
Digital Content Producer
Introducing the latest digital business trend from APAC countries. If you have any interest in running content marketing or influencer campaigns, please kindly reach out to me at rodorigo@orangefox.ai
Shibuya Scramble Square WeWork!
At the Center of SHIBUYA
Although WeWork distributed lots of negative stories worldwide in 2019, it is still popular to some extent here in Tokyo and I see really lots of people working here. Not only Shibuya but many WeWork office around Tokyo are still crowded and must be generating some sizeable revenue provided this high price.
hot desk membership
Work in Shared Lounge
$773
- 365d x 24h access
- Home location is Shibjya. The price varies depending on your home location.
- 2 Meeting room Credit included.
- Access to WiFi, and printers
dedicated office membership
Get Dedicated Room
$1550
- Get dedicated room for 2 people (Price slighly varies depends on which room you choose)
- 16 Meeting room credit per month.
- 265d x 24h access.. and other conditions are same as the hot desk membership.
Access to Other Locations
There are more than 10 WeWork offices in Tokyo and you can use the “shared space” of those all WeWork offices once you get the membership but it is until 6pm so your card-key does not work after 6pm.
Also, please note that some WeWork Tokyo offices do not have the shared space like Hrajuku & Hanzomon. I heard the worlds most expensive WeWork office is WeWork Harajuku.
WeWork Shibuya
Innovation with Opera Software in the early 2000s
Opera Came to Japan
I already forgot when they established their Tokyo office, but I can still very clearly remember the good & old days of this very characteristic software startup because it was actually my first software company where I worked as an account manager. I can’t believe more than 10 years already passed after I left there. Now, let’s start revieing what they (we) achived in the early 2000s.
With WILLCOM & KDDI
The device, “KYO-PON” was made by KYOCERA and sold by Japanese operator, WILLCOM in 2004. It was the first device sold in Japan with Opera Browser which supports HTML rendering. In that era, people here are typically only viewing compact-HTML websites from the mobile devices so that device was kind of disruptive at that stage. KYO-PON had micro-ITRON OS. TRON operating system was not very popular choice for the mobile device but KYOCERA was somehow using it.
Write Once Run Anywhere..?
Although that tagline is popular for the decades, actually make broswer running on multiple OS turned out to be a lot of hustle in terms of quality assurance (and also bug-fixing). Opera delivered “Opera for BREW” for Jpaanese big MNO, KDDI. That deal generated rougly $3 Million per year in the busiest years but required to have some big QA engineer team on the ground.
It was a good growing opportunity for me to some extent!
Work in Norwegian Software Company
It was always my biggest pleasure to go to Norway and make friends there. The people were friendly and the nature was awesome. Really beautiful country but somehow things there were very expensive.. Yes, Oslo is known as the most expensive city to live in! At that time, Opera already had more than 300 employees globally. The management there did not have good reputation actually. When I was visiting the headquarter, some people said that their salary is even cheaper than Oslo bus drivers so it is definitely impossible to hire good QA engineers 🙂 I could not confirm if it is true or false but it was probably true, I guess.
In front of former Opera headquarter in Oslo.
What I learned There
One of my colleague decided to leave the company and on that departure day, in front of the whole office members, he said “I love this people but I think the leadership of the company is wrong!”. It was kind of a shocking experience for me when I was only 27 or 28 YO. I was probably agreeing that leaving colleague. On the other hand, I was thining how I could manage this difficult business assuming if I was a board member. Opera completely failed and eventually acquired by some Chinese private equity. I am quite sure that with good leadership, maybe Opera could have better future by acquireing more share on this desktop browser market. (embedded browser license business was good in terms of revenue but from long-term viewpoint, getting more user must have enabled longer life of the entire company by increasing valuation.
Who to work with is very important
I am a bit sorry for this obvious conclusion, but still my biggest key take-out is this! Founder of Opera was trying to work with his old friends so those friends are taking very important roles in the company. For example, CCO did not have much experience in commercial terms and CMO did not have good marketing expereince.. like that 🙂
It happens even in Facebook so people says the friend of Sandberg is occupying important positions there. Nonetheless, the overall performance is not such bad so far so she happens to have “good” firneds maybe.
Especially in Opera’s Swedish office, they had many great developers, I remember. I was always enjoying working with those smart guys. They were aso kind and friendly. Afterall, here is what I got from my days in Opera Software 🙂
BizDev Expereicne
Handled the contrac with more than 1M EURO value after developing the deal. Gave me good confidence.
Language
I started speaking English everyday. My first experience of global organization gave me a lot of choice later on.
Computer Science
Learning about computer was a lot of fun. Embedded software eco-system gave me a lot of basic but important knowledge.
That is pretty much it!
After my departure, I heard that one of their ex-JP country manager was about to getting sued for the harassment by ex-employee and the company was forced to pay some settlement.. (led by legal team in Oslo) That might be something I could not experience if I was working in a typical Japanese public established big corporates.
In the tech startups, I can see more “wild” world therefore both of the wild beautiful things like passionate engineers, friendly foreigners, etc & wild dirty things..! Maybe better for me because that is the “real” world.
Things to check out before Granting Stock Options in JP
The difference of the tax laws are quite tricky when you handle the monetary rewards like stock options for your team members spreading many locations over the globe. Now, here is a bit of your must-check-items especially important in Japan’s tax related regulations.
Options Adoptive
to the local tax law
20%
- Same percentage of tax that is applied to your capital gain.
- In Japan, they call it “separate taxation”. The tax amount is specifically calculated for your capital gain.
- For more detailed information, please consult with your accountant.
Options non-Adaptive
to the local tax law
43%
- Same percentage of tax rate as salary income (above 9M JPY, it will become 43%)
- They call it “Comprehensive Taxation”.
- 33% of the income tax plus 10% local tax
- Ideally, the options should be adoptive one in order to avoid this high tax rate.
Based on these difference that comes from the local tax regulation, maybe you have to design your stock options so as to make it “adoptive” to the local tax low. The “tax-law-adoptive” stock options must comply with following rules.
Rules to comply in order to make your options “Tax Adoptive” with Japanese regulations
Cliff
Longer than 2 years of the non-vesting period.
Capital Gain
There is upper limit. Should be less than 12M JPY annually.
Receiver
Need to be your employee. Should not be your spouse or relative.
Strike Price
The Strike Price should be higher than then-current stock price.
Given for FREE
That stock option must be granted for free.
Non-Transferable
Stock option should be stated as “Non-Transferable” on your contract.
Work with
Your accountant might clarify all of your worries but in case you need help, feel free to inquire!
