TOKYO — New stock market listings in Japan are poised to fall 30% year-on-year in the first half of 2022 as a confluence of global factors makes international investment scarce.

Thursday, 37 companies were to make IPOs between January and the end of June, against 53 at the same time last year. Not since the 63% drop in the first half of 2009 have IPOs dropped so sharply.

Interest rate hikes in the United States and the impact of Russia’s invasion of Ukraine compressed foreign investment flows into Japan, wiping out some of what was an active IPO market. scholarship last year.

“The supply of funding from overseas institutional investors has shrunk, making it difficult to obtain large-scale listings,” a market source said.

The information and communications sector has been one of the hardest hit. IPOs in this category declined to 27% of total new listings, from 40% in 2021. Recruitment firms and other service companies accounted for the largest share of new listings in the first half, at 38%.

The 25 IPOs through May raised 11.7 billion yen ($86.5 million), down more than 80% from January to May last year. Seven companies, including SBI Sumishin Net Bank, delayed their listings in the first half, more than three times as many delays as the same period last year.

Venture capital and other sources of funding outside the stock market are also showing signs of running out of steam. A Tokyo tech company that raised about 2 billion yen in the previous year has seen its funding outlook dim.

“We have no choice but to limit our initial investments in marketing and hiring,” said a member of the management team.

A similar IPO slump is unfolding overseas. IPOs tracked by Refinitiv from January to May fell 40% in number and 58% in value compared to the same period last year. Both were the biggest declines for this period since 2009. The Americas saw their value fall by 90%, while Asia suffered a drop of almost 20%.

Even before the war in Ukraine, the stock market was increasingly less tolerant of tech companies that are growing well but constantly losing money.

“Institutional investors have started to pay more attention to the timing of profitability,” said Hayato Takei, director of equity capital markets and syndication at Mizuho Securities. Unlisted companies “must show that they can make stable profits”.

Japan still has plenty of companies looking to go public, but they face broader headwinds including a weak yen and high commodity prices, market watchers say. Takeshi Matsushita, deputy director of public underwriting at Nomura Securities, expects 90 to 100 listings in Japan this year.

About The Author

Related Posts