Please note that the original article is in Japanese. The following is a summary of its content.
Introduction: The Reality After the Bell
This article (Part 2) picks up after the 2019 Nasdaq IPO of Kura Sushi USA (KSUSA), focusing on the real-world costs, human resource challenges, and investor relations (IR) strategies necessary for sustainable growth as a US-listed company. The interview continues with former CFO Koji Shinohara and the leadership team from Quantum Accounting.
The Hidden Costs of Going Public
Mr. Shinohara details the significant, ongoing expenses that begin after the IPO:
- D&O Insurance: A critical pre-IPO “housekeeping” item required by underwriters is D&O (Directors & Officers) Insurance. Post-listing, the premium for KSUSA skyrocketed to approximately $800,000 annually.
- Compliance & Professional Fees: Ongoing compliance is a major expense. This includes high fees for a PCAOB-registered audit firm and legal counsel (Squire Patton Boggs) for mandatory SEC filings such as the 10-K, 10-Q, and frequent 8-Ks. These annual running costs are in the “millions of dollars.”
- Internal Controls (SOX/ICOFR): The company had to build its ICOFR (Internal Control over Financial Reporting) framework. Lacking sufficient internal resources, they initially relied on third-party service providers.
- Financial Independence: To demonstrate independence to the market, KSUSA secured its own bank loans for new store openings, without a financial guarantee from its Japanese parent.
Proactive IR and the Post-Listing Reality
A significant portion of the discussion focused on the demanding nature of post-IPO investor relations.
- The Bilingual Team: A key success factor for KSUSA was having a fully bilingual management team (CEO, CFO, Director of Operations) and a bilingual IR Manager (who, coincidentally, started his career frying tempura at a KSUSA store). This made quarterly communications smooth.
- Proactive Engagement: Pre-pandemic, the team “aggressively” engaged with investors by attending quarterly meetings and non-deal roadshows hosted by their underwriters.
- The FPI vs. Domestic Filer Gap: The interview contrasts KSUSA’s approach with other Japanese FPIs (Foreign Private Issuers). While FPIs are only required to file semi-annually, KSUSA filed quarterly and on time. This required dedicated investment in people and systems, but it avoided the common pitfall of presenting “stale” information or facing “non-timely filing” issues, which can damage investor confidence.
- Board Structure: As part of pre-IPO housekeeping, the company appointed independent directors, including a qualified Audit Committee Chairman (Mr. Shintaro Asako, formerly of Arthur Andersen and DeNA).
Lessons for Japanese Companies
- Timeframe: The IPO preparation took two years from Mr. Shinohara’s arrival. He cautions that companies attempting to list in 6-12 months often fail to plan for the post-listing phase, which is the most difficult.
- Professional Fee Structure: Mr. Shinohara provided a clear insight into their fee structure:
-Underwriters (BMO): Were not paid a monthly retainer fee. Their compensation was solely the underwriting discount (7% of the capital raised).
-IR Consultant: Was paid a monthly retainer fee plus a success fee, which was not a prohibitively large amount. - Earnings Calls: Unlike Japanese press conferences, US earnings calls are audio-only. The company does not provide a direct earnings forecast (like the Japanese Tanshin). Instead, analysts build their own projections based on qualitative interviews, making the Q&A preparation critical. Mr. Shinohara noted that both the underwriters and the IR consultant were heavily involved in preparing management for this Q&A.
