Reliable, global, liquid: Tokyo Stock Exchange as a first-class IPO destination
As a popular choice for IT-related companies to go public, Tokyo offers many benefits to enterprises seeking ticker codes.
With all types of tech companies across Asia gradually maturing, many are seeking to offer their shares for sale on the public market. While many business leaders opt for initial public offerings at international financial centers, Tokyo Stock Exchange (TSE) is a prime option for a new breed of tech companies that are seeking a well-regulated market with deep liquidity.
At the end of 2021, TSE was the fifth largest stock market globally and the second largest in Asia after the Shanghai Stock Exchange by aggregate market cap. TSE is larger than the Hong Kong Stock Exchange and Euronext by annual trading value, and is home to more listed companies than the Nasdaq and New York Stock Exchange. These factors make Tokyo one of the top IPO destinations in the world.
During the 2021 financial year, 136 enterprises listed on TSE, including five enterprises that have relations with foreign countries—the highest number over the last decade. In fact, since 2011, there have been 18 cross-border IPOs on TSE, reflecting Tokyo’s status as a strong alternative to New York and Hong Kong, particularly for businesses based in Asia. Overall, enterprises operating in IT-related sectors accounted for 64% of firms that went public in Tokyo last year.
Diversity of Tokyo Stock Exchange
TSE’s Growth Market, which was formerly called Mothers, is designed for companies that expect to attain massive growth in the future. Applicant firms do not need to be profitable at the time of their IPO but must have a reasonable business plan in place to achieve strong growth. The median price-to-earnings ratio (PER) of 2021 IPOs on Mothers was 82.7x. Additionally, TSE Mothers (USD 85.6 billion market cap) was more liquid than Hong Kong’s Growth Enterprise Market (GEM; USD 14.1 billion market cap) and Singapore’s Catalist (USD 8.8 billion market cap).
While the Growth Market is suitable for technology companies aiming for aggressive expansion with profitability on the horizon—a “high risk, high reward” roadmap—TSE also comprises the Prime bourse for companies with large market caps and the Standard bourse for enterprises with baseline, standard market cap levels. Together, these three boards attract retail and institutional investors that can construct portfolios to satisfy all financial goals.
A prime IPO destination in Asia
In February 2021, mainland China’s AXXZIA, a cosmetics developer, listed its shares on the Mothers board. This was followed by Taiwanese AI marketing SaaS developer Appier Group in March; the company completed an IPO with a JPY 160 billion (USD 1.2 billion) market cap. In June, Singapore-based Omni-Plus System Limited, which makes sustainable materials, went public. In December, Singaporean management service and investment firm YCP Holdings as well as Vietnam’s Hybrid Technologies, an outsourcing and offshoring consulting firm, both had IPOs in Tokyo.
Moreover, trading on TSE is global—in FY2021, 60% of the USD 31 billion average daily trading value on TSE’s first section (for blue-chip companies with high liquidity) was conducted by foreign investors, meaning companies that go public in Tokyo can gain exposure to diversified investors. Meanwhile, retail investors formed the majority of trading for the USD 2.7 billion average daily trading value in the second section (for well established medium-sized companies), Mothers, and JASDAQ.
Listing support by Tokyo Stock Exchange
TSE offers individual and institutional investors a dynamic trading environment that includes a variety of companies spanning a range of market caps and risk levels. This makes TSE a strong contender for any company seeking to tap into the liquidity that is available in Tokyo.
“To overcome challenges such as language barriers and listing scheme considerations utilizing Japanese Depositary Receipt (JDR), our teams in Tokyo and Singapore offer one-on-one listing preparation support to companies that are considering an IPO in Tokyo as they boost their corporate profile in Japan,” said Hiromi Yamaji, president and CEO of TSE.
TSE is a meaningful exit option for startups from all around the world, particularly those based in Asia. Additionally, by listing on TSE, companies can contribute to Asia’s overall economic growth while accessing an active pool of investors and traders.