Japan sees fewer IPOs as Iran war, AI shock and rate anxiety slow tech listings
The Tokyo Stock Exchange's mainstay Prime, Growth and Standard sections saw 17 companies go public in the first half of the year, down about 30% from a year before.
Japan has witnessed a significant decline in initial public offerings (IPOs) amid various factors including the Iran war, concerns about AI replacing traditional software, and rising interest rates, according to the Tokyo Stock Exchange (TSE). In the first half of the year, only 17 companies went public in the main sections, a 30% decrease from the previous year, as reported by TSE.
Annual IPO activity has been relatively low since the peak of 123 listings in 2021, following favorable conditions after COVID-19 pandemic monetary policies eased.
The decline in IPOs is particularly pronounced on the TSE's Growth section, which caters to startups. This is attributed to the TSE's new requirement that newly listed firms must reach a market capitalization of at least ¥10 billion within five years of their IPOs to remain in the Growth section. This stricter criterion has led many companies to move to the second-tier Standard section.
The benchmark index for the Growth section, the TSE Growth Market 250 Index, has been falling since 2022, creating an unfavorable environment for IPOs.
The decrease in IPOs is also linked to the so-called "Anthropic shock" triggered by the rise of AI services from U.S. company Anthropic, which raised concerns about AI potentially replacing traditional software products and businesses. Additionally, global stock markets faced a downturn due to rising interest rates resulting from the Iran war, further contributing to the decline in IPO activity on the Growth section, which fell by 40% in the first half of the year compared to the previous year.
Despite these challenges, there is optimism for future IPOs by companies expected to receive government support in sectors like autonomous driving, space, and semiconductors. Large-scale IPOs are still scheduled for later in the year, such as Tier IV, an autonomous driving system developer. Market participants remain interested in "deep tech" companies that aim to solve social issues through technological innovation. Consultations about IPOs have not decreased, according to Soichiro Saito of SMBC Nikko Securities.
Written by urgent.news from Japan Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
