Japan Ventures Filing IPO in Asia Emerging Equity Markets

Osaka – Sunday, August 22, 2010




Nikkei, Japanese newspaper specialized in business and economy, reported today that Japanese Venture companies are filing IPO in Asia emerging equity markets instead of in Japan stock exchange market. It is estimated that by the end of next year more than 10 companies are to file IPO not in Japan where IPO filing has been sluggish but in Korea and Taiwan where IPO has recovered and stock trading is active.



In addition to effectively raising capital, such companies aim to enhance company awareness and leverage in expanding business in Asia emerging countries.



If more leading and promising companies should list in stock market outside Japan instead of in Japan market, it is possible that hollowing of Japan’s emerging equity market accelerates.



1. Which companies are filing in Asia emerging equity market?



Major Japanese Venture Companies Filing IPO Abroad

(Source: Nikkei, translated by the author)

Company Name / Business / Year of Foundation / Sales (million yen/year)

DLE Inc / Production of animation and videos / 2001 / 800

Zero / Internet payment / 1989 / 3,000

Food Discovery / Lecture on vegetable sommelier, green vegetable sales / 2001 / 1,300

Office 24 / OA equipment sales, office convenience / 1993 / 7,500

Salvatore Cuomo Japan / Pizza franchise chain / 2005 / 5,600



DLE Inc http://www.dle.jp/en/, an animation production company based in Tokyo, is to file IPO in Taiwan equity market by June, 2011. They had been planning to file in Japan but changed their policy because Japanese animation is highly evaluated abroad. The company has already made alliance with a Taiwan production company, and aims to expand their business, taking the opportunity of IPO.



Zero http://www.zeroweb.co.jp/, an Internet payment company based in Tokyo, is to file IPO in an emerging equity market called “Catalyst” of Singapore. The company aims to raise capital necessary for future growth and enter Asia market.



Quite a number of companies are planning to file in an emerging equity market called “KOSDAQ” of Korea. Food Discovery http://fooddiscovery.jp/, a company based in Tokyo that is engaged in businesses including lecture on vegetable sommelier and green vegetable sales, is to file IPO in KOSDAQ in October this year. Office 24 http://www.webjapan.co.jp/, a company based in Tokyo engaged in business of OA equipment sales and office convenience, also has established its policy of filing IPO in KOSDAQ around November this year. Salvatore Cuomo Japan http://www.salvatore.jp/, a Tokyo based pizza chain company, also is studying to file in KOSDAQ. The companies aim to raise capital in Korea and utilize it in building and establishing local branch network.



Internet (online) business companies and semiconductor related companies are also planning to file IPO in emerging Asia instead of Japan.



2. Have Japanese venture companies been filing IPO in Asia emerging equity market until today?



No, only 1 Japanese venture company (excluding local joint venture companies) had filed IPO in KOSDAQ. One after the other Japanese venture companies filed IPO in NASDAQ in the U.S. around 2000. Then Japan local emerging stock exchange markets (e.g. Mothers = Market of the High-Growth and Emerging Stocks, JASDAQ = Japan Association of Securities Dealers Automated Quotations) were drastically improved and Japanese venture companies has been filing IPO to such markets instead of those of abroad.



3. Have Japanese companies been active in filing IPO lately?



No. Japanese companies filing for IPO has been decreasing in the last 4 years, with the negative effects of the worldwide depression. In 2009, only 19 companies filed for IPO, which is 1/10 of the peak in 2006. Experts estimates that only 20-30 companies will file for IPO in 2010.



The amount of capital raised by IPO and after being listed has also been sluggish. The average capital raised in 2009 was 3 billion yen, which is less than that of 2006.



4. Why Japanese venture companies are aggressive in filing IPO in Asia emerging stock exchange market?






1) Asia emerging stock exchange market is active



Asia emerging stock exchange markets are now attracting investment capital, and many companies are filing IPO in such stock exchange markets. According to WFE, 56 companies filed IPO in KOSDAQ in 2009, which is 47% increase from 2008, and 14 companies filed IPO in Catalyst in 2009, which is double of 2008.



In addition, Asia emerging stock exchange markets are making upmost efforts in attracting companies abroad filing IPO in their market. Taiwan Equity Market has abolished regulation for foreign companies being listed in their market. KOSDAQ also are focusing on attracting foreign companies to list in their market.



2) Hurdle for filing IPO in Asia emerging equity market is low



Time required to be listed after filing is far shorter for Asia emerging equity market compared to those for Japan. It takes more than 2 years in Japan, when it takes only approximately 1 year for KOSDAQ and 1-1/2 years for Taiwan.



Profit criteria, a critical requirement for filing IPO, is less for Asia emerging equity market compared to that of Japan. The criterion is 500 million yen for JASDAQ, when it is approximately 150 million yen of net profit for KOSDAQ. For Catalyst, there is no regulation on this issue.



5. What are the disadvantages of filing IPO in Asia emerging equity market?



1) Additional cost is necessary



Additional cost would be necessary. Such cost includes cost of local IR to be performed in local language, and cost to be paid to lawyers accompanied by information disclosure.



2) Alliance with sponsor company is required (in some cases)



In filing IPO in Catalyst, companies are requested to make an alliance with a sponsor company that is responsible as guarantee of listing. Finding an appropriate sponsor company and making an alliance for this purpose means much additional work.