Japan’s 28 IPOs in 11 Days Give Abe a Lift as Startups BoomYuji Nakamura and Yuko Takeo
December is going to be a busy month for Japan’s equity markets.
The 28 initial public offerings from yesterday through Dec. 26 will push the 2014 total to 80, the most since 2007, bourse data compiled by Bloomberg show. More than half will list on the market for small, high-growth businesses known as TSE Mothers, where listing requirements were relaxed in March.
The flurry of share sales is being led by technology entrepreneurs and underscores confidence in Japan’s stock rally as Prime Minister Shinzo Abe heads to the polls in two days. Even with the world’s third-biggest economy in recession, the unprecedented monetary easing under Abe that’s spurred a 141 percent surge for the smallest listed companies sets the scene for more IPOs in 2015, says Kabu.com Securities Co.
“I expect more IPOs next year,” Tsutomu Yamada, a market analyst at Kabu.com Securities, said by phone from Tokyo yesterday. “Businesses have to list when the going is good, and investors want to put their money in companies that will grow. Internet, biotechnology and robotics companies are fresh, small and able to grab investors’ attention.”
The companies that debuted this year through November on the Mothers market had a median value of $89 million on listing, with 74 percent involved in Internet, software, robotics or biotechnology businesses. Mothers is an acronym, of sorts, for “market of the high-growth and emerging stocks.”
In the 11 trading days ending Dec. 26, mobile-game developer Gumi Inc., online community operator Kayac Inc. and health-information manager Medical Data Vision Co. will go public in Japan. Gree Inc., which listed on the same market in 2008, is Gumi’s second-largest shareholder. CyberAgent Inc., which debuted 14 years ago, is an investor in Kayac.
“Japan’s first generation of startups from the late ’90s have matured and are now supporting the next wave of entrepreneurism,” said Shinichi Takamiya, chief strategy officer at Globis Capital Partners, a venture capital firm that oversees about $320 million. “We can see the results beginning to show up in the form of more IPOs.”
GMO Tech Inc., which optimizes search-engine results and provides smartphone marketing services, soared 83 percent on its debut yesterday. It slid 20 percent today. The TSE Mothers Index slipped 0.7 percent, while the broader Topix index added 0.2 percent.
This year’s largest debuts on the high-growth market included maker of assistive-limb robot suits Cyberdyne Inc., Seattle-based biotechnology company Acucela Inc., and mobile e-commerce operator Voyage Group Inc. Through November, IPOs on the Mothers market raised 69.8 billion yen ($587 million) as total initial share sales in Japan climbed to 1.3 trillion yen, Bloomberg data show.
In an effort to lure smaller businesses, Japan Exchange Group Inc. lowered minimum shareholder requirements in March and is offering more consultation services to attract IPOs from its home market and countries such as South Korea and Malaysia, where accounting rules are similar to Japan, said Yasuyuki Konuma, an executive officer who oversees new listings and business development at the bourse.
Since elections were called in November 2012 that brought Abe to power, the TSE Mothers Index has more than doubled, while the Topix soared 93 percent through yesterday. Abenomics, the premier’s signature plan to end decades of deflation, has unleashed unprecedented monetary easing that weakened the yen and sparked a boom in stock prices and corporate earnings.
“Our goal, especially through the Mothers market, is to support young entrepreneurs and nurture them to grow great companies 10 or 20 years from now,” said Konuma. “We’re trying to support the country’s growth strategy of promoting innovation.”
The prime minister has framed the election as a referendum on his economic policies, calling the snap vote at the same time as delaying a sales-tax increase after a hike in April unexpectedly pushed the economy into recession. While Abe, 60, has pledged to make Japan the world’s most innovation-friendly nation, progress has been slow on his program of deregulation and structural reforms.
The Mothers venue was founded in 1999 at the height of the dot-com boom. With individual investors accounting for more than 70 percent of trading, stocks tend to have lower liquidity and higher volatility than the broader market. The median bid-ask spread for Mothers companies, which measures trading costs, is 2.5 times higher than for the Topix.
The 44 IPOs in the smaller market this year compare with 20 on the Tokyo exchange’s first and second sections, according to the bourse’s data.
Toshiaki Iwasaki, an analyst at Mito Securities Co. in Tokyo, said market participants expect as many as 100 IPOs next year, which signals a positive outlook for shares.
“An increase in the number of IPOs usually comes when the overall market is doing well,” he said.
Japan IPOs in December, according to TSE website:
Listing Date Company NameDec. 11 GMO TECH Inc. Dec. 11 B-Lot Co. Dec. 11 Snow Peak Inc. Dec. 11 Bengo4.com Inc. Dec. 12 CrowdWorks Inc. Dec. 15 TechnoPro Holdings Inc. Dec. 16 SFP Dining Co. Dec. 16 U-Next Co. Dec. 16 MarkLines Co. Dec. 16 Medical Data Vision Co. Dec. 16 Artra Corp. Dec. 17 Imamura Securities Co. Dec. 17 Takemoto Yohki Co. Dec. 17 Fruta Fruta Inc. Dec. 18 Gumi Inc. Dec. 18 Adventure Inc. Dec. 18 Dairei Co. Dec. 19 Metawater Co. Dec. 19 Scigineer Inc. Dec. 22 eREX Co. Dec. 22 Interworks Inc. Dec. 24 Datasection Inc. Dec. 24 Yossix Co. Dec. 24 Watahan & Co. Dec. 25 Extreme Co. Dec. 25 Kayac Inc. Dec. 25 Tokyo Board Industries Co. Dec. 26 MRT Inc.