New Stock Exchange for Japanese Start-Ups
Last week the London Stock Exchange and the Tokyo Stock Exchange announced that they would set up a new stock market for Japanese start-up companies. The market, which has yet to be named, will seek to eliminate numerous requirements for listing and will only be available to professional investors. The LSE already operates a similar market in London called AIM. The two exchanges hope to have the new market up and running by the end of 2008.
The move comes as Japanese financial authorities work to re-establish Tokyo as an international financial center. In recent years, the TSE has seen the number of foreign listings fall, and overall Japan has been losing its luster as a financial center compared with other East Asian markets, most notably Shanghai.
Whether the new market will be successful is open to to question. Some suggest that AIM itself poses significant competition. The London market has been extremely successful in capturing foreign listings. In 2006 the market held 462 IPOs compared with 138 launched on NASDAQ and 136 at JASDAQ, Mothers, and Hercules combined. Japanese start-ups may figure that AIM serves its needs nicely and decide to list on AIM instead. In July of last year, Secure Design, a provider of biometric verification systems, became the first Japanese company to list on AIM.
On the other hand, there's reason to doubt whether AIM will act as a drag on the new exchange. Unlike U.S. or many European companies that need to prepare all of their financial documents in English anyway, it will be a significant burden for small Japanese companies to prepare all their disclosures in English and do the IPO "tour" for an English-speaking audience. That's a major reason why Japanese ADR listings are so few and limited to mostly very large companies.
Notably, this latest venture follows JASDAQ's move in August to establish a small company exchange called NEO to compete with TSE Mothers and OSE Hercules. Thus far the response to that entity has been underwhelming. It's interesting timing that there are so many efforts to establish exchanges for smaller cap companies when existing exchanges are not succeeding.
Last week the London Stock Exchange and the Tokyo Stock Exchange announced that they would set up a new stock market for Japanese start-up companies. The market, which has yet to be named, will seek to eliminate numerous requirements for listing and will only be available to professional investors. The LSE already operates a similar market in London called AIM. The two exchanges hope to have the new market up and running by the end of 2008.
The move comes as Japanese financial authorities work to re-establish Tokyo as an international financial center. In recent years, the TSE has seen the number of foreign listings fall, and overall Japan has been losing its luster as a financial center compared with other East Asian markets, most notably Shanghai.
Whether the new market will be successful is open to to question. Some suggest that AIM itself poses significant competition. The London market has been extremely successful in capturing foreign listings. In 2006 the market held 462 IPOs compared with 138 launched on NASDAQ and 136 at JASDAQ, Mothers, and Hercules combined. Japanese start-ups may figure that AIM serves its needs nicely and decide to list on AIM instead. In July of last year, Secure Design, a provider of biometric verification systems, became the first Japanese company to list on AIM.
On the other hand, there's reason to doubt whether AIM will act as a drag on the new exchange. Unlike U.S. or many European companies that need to prepare all of their financial documents in English anyway, it will be a significant burden for small Japanese companies to prepare all their disclosures in English and do the IPO "tour" for an English-speaking audience. That's a major reason why Japanese ADR listings are so few and limited to mostly very large companies.
Notably, this latest venture follows JASDAQ's move in August to establish a small company exchange called NEO to compete with TSE Mothers and OSE Hercules. Thus far the response to that entity has been underwhelming. It's interesting timing that there are so many efforts to establish exchanges for smaller cap companies when existing exchanges are not succeeding.
posted by Bob at 10:44 AM
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