The world champion chess prodigy who made hottest ever Japan IPO – SFGate


Takahiro Hayashi won his first nationwide title in shogi — Japanese chess — while still in high school, and by the age of 22, he was the world amateur champion. His coaches were urging him to turn pro.

But Hayashi wanted to be an entrepreneur, not a chess player. And so, in 2009, he found himself in a room with some local venture capitalists, presenting a 120-page pitch about his social game firm. The financiers kind of tuned out.

“One of the investors told me that he didn’t really listen to the explanation of our business plan,” the 41-year-old Hayashi said in an interview at Heroz Inc.’s headquarters in Tokyo. “He said that ‘You’re a world champion, so you’ll work something out.”‘

Hayashi got the financing. “It blew my mind,” he said. But so far at least, the VC executive’s bet has proved profitable. Heroz, which went on to develop artificial intelligence technologies through the creation of online games such as shogi and then use AI for a range of other services, is now a public company, and its shares are thriving.

In April, the company listed on a startup market on the Tokyo Stock Exchange. It was a record-breaking debut. The shares opened 11 times higher than the IPO price, the best ever start of trading by a Japanese listed company. The stock has almost quadrupled since going public.

“I didn’t think it would be so successful,” said Hideto Fujino, one of Japan’s most famous stock pickers, who took a stake in the company as a personal investment before Heroz went public and is now one of the top 10 shareholders. Fujino, a keen shogi player himself, says he bought the stock initially to encourage the company, rather than because he expected to profit. “It was more a form of support,” he said.

Heroz released its game “Shogi Wars” in 2012. The following year, the company’s artificial intelligence engine became the first to defeat a professional player of Japanese chess. That was about 16 years after Deep Blue, a chess computer created by IBM Corp., beat then world champion Garry Kasparov. Shogi is more complex than chess because pieces return to the board after being captured, increasing the number of move permutations that must be considered.

After building the new Deep Blue, Heroz used the deep learning and machine learning skills it acquired to expand into other areas — everything from construction to financial services.

It couldn’t have come at a better time. The AI industry is expanding rapidly in Japan, where a shrinking workforce is causing the tightest labor market in decades, creating an opportunity for companies to use the technology to help fill vacancies and improve efficiency. The Japanese AI market may top $18 billion by fiscal 2030, a more than sevenfold increase from fiscal 2016, according to Fuji Chimera Research Institute Inc. estimates. “There’s huge potential,” Hayashi said.

Heroz has been working with Takenaka Corp., the construction company that developed Japan’s tallest skyscraper, to create an AI system to help design buildings. The system will crunch Takenaka’s existing structural design data and learn from its architects to provide various patterns for how buildings could be designed. Architects then compare the patterns and consult with clients to decide which one to use.

Takenaka expects to reduce the routine work associated with designing building structures by some 70 percent, giving its professionals more time to focus on being creative. It aims to develop a prototype of the AI system by the end of this year and put it to use by 2020.

“Structural design is a lot like shogi in that you’re choosing the best of various options,” said Hirokazu Yoshioka, the head of technology planning at Takenaka. “So Heroz is the perfect partner for the AI system we want to make.”

Heroz has also formed a partnership with Tokyo-based Digital Hearts Holdings Co. to use AI technology for software testing. If all goes to plan, the AI engines will learn by themselves the best way to test programs.

And in the world of finance, Heroz has tied up with online brokerage Monex Inc. to provide robo-advice for people who trade currencies. The system analyzes their past performance and provides suggestions for improvement.

With all the excitement about Heroz’s stock, valuations have gone through the roof. The shares trade at almost 40 times book value and more than 215 times earnings.

Short sellers have been descending. Short interest stood at 59 percent of the free float as of Aug. 13, according to IHS Markit data. That’s the highest level among the 253 companies in the Mothers Index of emerging stocks.

“It’s overvalued,” said Mitsushige Akino, an executive officer with Ichiyoshi Asset Management Co. in Tokyo. “It’s an excellent company, but people’s expectations are too high and the shares have gone up too far.”

Heroz now has a market value of 59.4 billion yen ($534 million). That means Hayashi and his co-founder Tomohiro Takahashi, who each have 37 percent stakes, are each worth almost $200 million from their shareholding alone. The market decides the share price, so it’s difficult to comment on it, Hayashi says.

But he does have one target in sight. The sixth-dan shogi player, generally the highest rank for amateurs, wants Heroz to become the next Japanese company with a market value of more than 100 billion yen.

“When we founded Heroz, we told investors that we wanted to create a 100 billion yen company,” Hayashi said. “It’s not worth doing if we don’t grow to that level.”

Cricket legend Imran Khan confirmed as Pakistan PM

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Media captionFive things to know about Imran Khan

Former cricket star Imran Khan has been elected prime minister of Pakistan in a vote at the country’s National Assembly.

His PTI party won the most seats in July’s elections – setting up Mr Khan to become PM with the help of small parties, more than two decades after he first entered politics.

He will be sworn in on Saturday.

Mr Khan, 65, will inherit a country with a mounting economic crisis and he has vowed to create a “new Pakistan”.

The charismatic sports star, who captained Pakistan to a World Cup victory in 1992, has long shed his celebrity playboy image and now styles himself as a pious, populist, anti-poverty reformer.

He ran on an anti-corruption platform that pledged to improve the lives of the country’s poor with an “Islamic welfare state”.

In Friday’s vote, Mr Khan was backed by 176 members. His opponent, Pakistan Muslim League-Nawaz (PML-N) president Shahbaz Sharif, received 96 votes.

Speaking after the results, the prime minister-elect vowed to bring about the “change that this nation was longing for”, according to local media.

He promised “strict accountability” for those who had “looted this country”.

“I did not climb on any dictator’s shoulders; I reached this place after struggling for 22 years.”

Opposition parties have claimed elements of last month’s elections were rigged. Despite this, they agreed to take their seats in the assembly.

In the lead-up to the election, Mr Khan was widely seen as the favoured candidate of the powerful military, which was accused of meddling against his rivals.

Applause and angry chants

Analysis by Secunder Kermani, BBC News, Islamabad

The announcement that parliament had chosen Imran Khan as the next prime minister was greeted by applause from his party, and angry chants from his rivals, the outgoing PML-N.

When it first became clear that the PTI had won the elections last month, Mr Khan addressed the nation in a conciliatory tone. Today he was more fiery.

He repeatedly rejected opposition claims that the vote was rigged and offered to investigate the allegations.

He challenged the opposition to hold a sit-in against him, telling them he would even provide them food and shipping containers to block roads.

Mr Khan faces real challenges, including a mounting economic crisis, but his supporters have high expectations of what he can deliver in terms of creating jobs, and improving healthcare and education. He promised to create a “new Pakistan”, now he will have to show the country what that looks like.

Before the election Mr Khan told the BBC that if he were to be elected, his initial focus would be on the economy. Pakistan’s currency, the rupee, has declined significantly in the last year. Inflation is on the rise and the trade deficit is widening.

Exports such as textiles have taken a hit from cheaper products by regional competitors, including China. Analysts say the new government may need to turn to the International Monetary Fund (IMF) for the country’s second bailout since 2013, which could complicate efforts to boost welfare.

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Media captionWhat do Pakistani women want from PM Imran Khan?

After the 25 July election, Mr Khan also vowed to hold talks with India to seek a resolution to the dispute over the Kashmir region, a key flashpoint between the nuclear-armed countries.

He also called for “mutually beneficial” ties with the United States, despite being an outspoken critic of that country’s anti-terrorism measures in the region, such as drone strikes. President Donald Trump recently cut aid to Pakistan, accusing it of providing a “safe haven” to terrorists active in neighbouring Afghanistan.

Pakistan, a country with a population of nearly 200 million, has been ruled on and off by the military during its 71-year history.

Whether as a result of coups or corruption allegations, no prime minister in its history has ever successfully completed a term in office.

Three-time PM Nawaz Sharif was ousted from office in 2017 over corruption allegations.

He was jailed in the lead-up to the vote, and his brother, Shahbaz Sharif, led the PML-N party into the election.

After the election, three major opposition parties banded together to nominate Shahbaz Sharif as a joint candidate in a bid to thwart Mr Khan.

However, one of the parties – the PPP party of assassinated ex-Prime Minister Benazir Bhutto – is reported to have withdrawn its support for Mr Sharif in the run-up to the vote and abstained on Friday.