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Seven of the 10 largest debuts in the first quarter were trading below their IPO prices as of April 12 amid Russia's invasion of Ukraine and heightening domestic inflation expectations. |
More Japanese IPO hopefuls may delay or cancel their debuts after market volatility and inflation forced seven companies to shelve their listings proposed between February and March this year.
Japan’s IPO market may see a further slowdown in the second quarter and beyond amid Russia's invasion of Ukraine and heightening domestic inflation expectations, analysts said. Seven of the 10 largest debuts in the first quarter were trading below their IPO prices as of April 12, according to S&P Global Market Intelligence data. Japan ranked ninth in the world by the number of new listings in the first quarter.
"Investors fear they can’t make profit from IPOs," said Katsumi Udagawa, a manager at the research and strategy department of Ichiyoshi Securities Co. The number of new listings in Japan in 2022 will likely be lower than in 2021, when 125 companies listed in the country, the highest in 15 years, Udagawa said.
The Japanese market mirrors the sharp slowdown in the global IPO market since February. Globally, the number of new listings in the three months ended March 31 dropped 37% from a year earlier, according to EY. IPO proceeds shrank 51% during the quarter, despite the strongest January in 21 years by the measure, according to the consulting firm.
The year had started on a buoyant note, with the S&P 500 index at an all-time high and the pandemic largely under control. But soon, markets were buffeted by volatility as Russia invaded Ukraine, oil prices jumped, global central banks appeared to fall behind on policy normalization amid rising prices, and COVID-19 infections increased in some countries, including in China, the world's second-biggest economy.
The uncertain outlook for the economy and markets will play on investors' minds, said Shunsuke Oshida, head of credit research at Manulife Investment Research Japan.
IPO slowdown
Seven new listings were halted in Japan in February and March, according to the Tokyo Stock Exchange. Those included SBI Holdings Inc.'s spinoff of its banking arm that was reportedly seeking to raise $1.2 billion. The tally of IPOs in April is expected to be nine, down from the 11 in the same month of last year, while one listing was canceled, as of April 20.
SBI Sumishin Net Bank Ltd. cancelled its IPO on March 7, citing "a change in various circumstances including the Ukraine situation and the movement in the [stock] market." Shares of its parent, SBI Holdings, fell 2.3% to ¥2,853 that day, the lowest level since Jan. 28.
For now, the market is awaiting whether Rakuten Group Inc., one of Japan's largest e-commerce companies, will go ahead with its plan to spin off its online banking unit, Rakuten Bank Ltd., in an IPO later this year.
"Preparations for the listing are well underway with plans to be listed later this year," Rakuten CEO Hiroshi Mikitani said during an online earnings conference in February "We want to increase the bank’s capital and strengthen its finance [through the IPO]."
Broader hit
The slowdown in new offerings could weigh on the stock market that has already weakened in recent months, analysts said.
The Nikkei stock index is down 6% since the start of the year on the back of rising interest rates and inflation fueled by higher energy prices amid sanctions against Russia. The index reached its highest level in more than three decades in September 2021.
"Fewer emerging businesses on the market mean less chances of finding bonanza and that could slacken the stock market and the economy," Ichiyoshi Securities' Udagawa said.