duckroll says they actually didn't go public until 2007.
It seems like they did fine on their business model but then after the success in the USA they thought they could make more money by self-publishing in the US instead of licensing out to Atlus USA. So they needed cash to form NIS (which turned out to be a horrible horrible company) and to BRANCH OUT BY PUBLISHING SHITTY GAMES FROM OTHER DEVELOPERS (also turned out horrible for them; Last Rebellion expectation = 30k sales, real sales = 3k).
If Atlus JPN bought them it wouldn't be so bad. They'd ditch the shitty other dev publishing, close up NIS and just have ATLUS USA bring over their games, and everything would be good.
MS would be silly because MS has zero interest in niche <100k 2d games for X360.