Information & Communication · 3843 · 2026-10-26
TOKYO — Freebit Co., Ltd. (TSE: 3843) said on October 26 it has re-priced to one yen the $3.1mn it paid last year for a company wholly owned by its founder, Hiroki Ishida, after an investigation found that the two patents behind the deal already belonged to Freebit. Ishida will return $3.1mn, give up an earn-out of up to $2.7mn, and pay a $0.75mn settlement. A company with a fatal governance flaw has barely held its ground. Ishida resigned on October 6 but remains a major shareholder, with 16.7% of the voting rights. So what's next?
All amounts in this note are converted from yen at ¥156.8 = US$1, the mid-market rate on October 23, 2026.
In September 2025, Freebit bought CountUp, a company founded and wholly owned by Ishida, then its chief executive, for $3.1mn plus an earn-out of up to $2.7mn. CountUp had revenue of $0.1mn. Its principal assets were two blockchain patents, filed in CountUp's name in 2022 for inventions Ishida had worked on while running Freebit. Ishida recused himself, and a special committee oversaw due diligence, a valuation and price negotiations. The committee's first offer, approved unanimously, carried an earn-out of up to $5.9mn.
In April 2026, a shareholder questioned the deal in a formal letter. Ishida handed the board his own draft of a reply in its name. It said the patents were his personal invention and that no outside committee was needed. The draft was never sent. Director Takumi Shibata wrote that the company had "no basis for its position." He then secured CountUp's entire GitHub history and analysed it: 94% of the program updates had been made during Freebit's working hours. On May 21, Shibata moved to set up a special investigation committee, and Ishida's executive authority was suspended the same day.
The committee found that the patents were employee inventions, developed in the course of Ishida's employment at Freebit with two Freebit employees and the company's premises and equipment. Freebit therefore already held a statutory licence to them. In other words, Freebit had paid its founder $3.1mn for a company whose principal assets were patents covering technology Freebit already had the legal right to use. Freebit had also paid CountUp $0.32mn in service fees, against which CountUp showed "almost no spending related to the services it was contracted for," and its office rent went to Ishida's personal company. The committee named one cause as "deference to the founding president, which hollowed out the board's checks." Ishida resigned on October 6, and Shibata became president. The $0.75mn settlement covers part of the $2.4mn the company spent on the investigation, legal advice and extra audits.
| Shareholder | Voting rights | As of |
|---|---|---|
| Hikari Tsushin group | 18.56% | Jul 29, 2026 filing |
| Hiroki Ishida (founder) | 16.70% | Apr 30, 2026 register |
| Alps Alpine | 16.09% | Apr 30, 2026 register |
| SoftBank | 7.33% | Apr 30, 2026 register |
Voting rights are calculated on shares outstanding net of treasury stock (21,822,315). The Hikari Tsushin group (Hikari Tsushin, UH Partners 2 and UH Partners 3) is as of its July 29, 2026 filing; the others are from the April 30, 2026 shareholder register.
At the July 23 annual meeting, Ishida's re-election received 68.00% support, the lowest of the seven nominees. Even with every one of his shares voted, he held 20.8% of the votes cast, short of the one-third needed to block a special resolution. What remains to him is shareholder proposals, calling an extraordinary meeting, and votes against director nominees.
A management buyout does not add up either. Buying the other 83.3% would cost $200mn at the current price, or $260mn with a 30% premium, more than six times the value of his own $40mn stake.
Tender offer rule. Acquiring more than 30% of voting rights requires a tender offer. The Hikari Tsushin group buying Ishida's stake would reach 35.3%, and Alps Alpine 32.8%.
Takeover response policy. Renewed in July with 65.62% support, it applies to any acquisition that takes a holder to 20% or more, and a buyer who acquires shares off market from a specific shareholder is treated as that shareholder's joint holder.
The way to take the whole stake without triggering either rule is for a third party with no existing holding to buy it as a block of under 20%. Company guidance for the fiscal year ended April 2026 is operating profit of $42mn and net profit of $22mn, a P/E of about 10.7x on a $240mn market cap.
Ishida sold Freebit patents it already had rights to, and lost. He lost his seat, the $3.1mn, the earn-out, and $0.75mn more. He still owns 16.7% as the founder, but on its own that number decides nothing. It cannot block a special resolution, it cannot fund a buyout, and the Hikari Tsushin group and Alps Alpine together hold twice as much.
That leaves him two roles. One is a dissatisfied shareholder whose tools are proposals, meeting requests and votes against the board. The other is a seller. The rules leave room for only one kind of buyer for the whole block: a newcomer staying below 20%. A company guiding to a 10.7x P/E, now run by the director who stood up to its founder, is a seat some situational investors may want.
Prepared for client circulation · Source data: beluuga.ai