Japan sees few large-scale IPOs in 2022

Jiji Press

9:22 JST, December 31, 2022

TOKYO (Jiji Press) — Japanese stock markets saw few large-scale initial public offerings in 2022 as institutional investors, including those from abroad, turned bearish in the wake of the war in Ukraine and other factors.

In the year, there were 91 IPOs, excluding those on the Tokyo Stock Exchange’s Tokyo Pro Market for professional stock investors, close to the average figure in the past 10 years.

Meanwhile, the amount of funds raised through the IPOs totaled about ¥340 billion, a level as low as those in 2019 and 2020, reflecting an increase in relatively small IPOs. “Institutional investors, mainly foreign institutions, were not active with IPO investment,” an official at Nomura Securities Co.’s IPO Department said, explaining why large-scale cases were held back.

For the success of large IPOs, investment by institutional investors not only in Japan but also from abroad is necessary.

But the Japanese stock market slumped in 2022 due to the impacts of Russia’s invasion of Ukraine, as well as global inflation and ensuing monetary tightening. Institutional investors “have been in risk-off mode since about a year ago,” a TSE official said.

As a consequence, many companies that had been considering IPOs have given up their plans or kept low the number of new shares to be issued when going public.

There were only three IPOs in which over ¥10 billion was raised in 2022, down sharply from 18 in 2021. The largest IPO in 2022 was for Socionext Inc., which designs and develops system-on-chips. The company went public on the TSE’s Prime section in October, raising ¥76.8 billion.

There were cases in which IPO prices were set lower than expected and failed to meet listing criteria as a result.

In the case of self-storage facility operator Storage-Oh Co., which was listed on the TSE’s Growth section on April 28, the provisional IPO price was set so low that the estimated total market value of tradable shares fell short of ¥500 million, the minimum level required for listing.

The proportion of tradable shares for consulting firm Intloop Inc., which debuted on the Growth section on July 8, dropped below a required level as of the July 31 end of its latest business year. The company announced on Oct. 27 a plan toward meeting the requirement.

The IPO market in 2022 was also characterized by the lack of companies seeing very high debut prices.

As of Dec. 22, only 16 companies had fetched initial prices more than twice as high as their IPO prices, down from 27 in 2021.

Some individual investors had less money to invest after stock prices of startups faltered, and their eagerness to buy shares in newly listed companies upon their market debuts waned, the Nomura Securities official explained.

The implementation of measures to correct the tendency for IPO prices to be set at unreasonably low levels could be another reason for the reduced gap between IPO and debut prices.

Meanwhile, some market players noted that it was good for the stocks of newly listed companies not to fetch excessively high initial prices because this helped the issues maintain firmness after their market debuts.

The 2022 IPO market was stable, an official at a Japanese brokerage house said.

Many market watchers expect 90 to 100 IPOs in 2023. Although the investment climate is uncertain, one analyst said that companies preparing IPOs remain motivated to go public.

Also, overseas institutional investors are believed to be becoming less risk-averse, raising hopes that the number of large-scale IPOs will increase in 2023.