Japan IPO cancellations hit record this month on coronavirus

TOKYO, April 17 (Reuters) – Fourteen Japanese companies have scrapped plans for initial public offerings (IPO) this month, more than in the aftermath of the Sept 2001 attacks on the United States, as the coronavirus pandemic looks set to plunge the economy into a deep recession.

The highest monthly cancellations on record in the current book-building system exceeded the 13 seen in October 2001, following the bursting of a tech bubble and the attacks on Sept 11.

The companies, ranging from an operator of child-care centres to a cyber security firm abandoned their plans after Japanese shares prices crashed to four-year low last month.

“Many companies have called off their plans as it has become difficult to sell their shares at the prices they wanted,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities.

Uncertainty about how long it will take for the economy and people’s lives to return to normal after the pandemic makes it tough for investors to assess companies’ profitability and establish fair value.

“The fact that the number of IPO has dwindled on the coronavirus is a source of concern,” said Koichi Nosaka, manager of market research at Securities Japan.

“Yet that could be helping to improve the demand-supply balance of Japanese start-up share markets.”

Investors who had planned to buy new offerings might opt for existing start-up shares instead, he added.

A case in point was Nextone, a management firm of music copyrights and other digital contents that went ahead with its IPO last month.

Since listing on March 30, its shares have almost quadrupled to 6,630 yen from their IPO price of 1,700 yen.

Shares of Matsuya R&D have more than doubled in the two weeks since manufacturer of sewing machines listed on Monday last week.

The Tokyo Stock Exchange’s Mothers start-up market index , where the two companies listed, has risen 19.2% this month, outstripping the rise of 13.5% in the main board. (Reporting by Hideyuki Sano, Mayu Sakoda and Daiki Iga; Editing by Clarence Fernandez)

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4 April 2022


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