Japan's IPOs in 2020 scored best opening gains since dot-com era

[TOKYO] In a surprisingly strong year for initial public offerings (IPOs) globally, Japan's 2020 market debutantes enjoyed their best opening share performances since the dot-com bubble era, helped by a groundswell of retail investors hungry for tech issues.

The average initial pop for IPOs in the Japanese market this year was nearly 130 per cent, the most since 1999. The best performer was artificial-intelligence systems firm Headwaters, which jumped 1,090 per cent in its first trade. Image-recognition software maker Ficha came second with an 806 per cent gain, followed by internet-of-things developer Tasuki, which rose 655 per cent.

Backed by easy-money policies and growth in individual investing, new listing markets have been frothy this year despite the coronavirus market turmoil, as seen in the dramatic gains of Airbnb and DoorDash in US debuts earlier this month. Stay-at-home tech plays and cloud computing upstarts especially found 2020 to be the perfect time to tap the public markets.

"The reason for the large opening gains is that there were many IPOs of stocks that were relevant to the times," such as Japan's digitalisation push, said Hideyuki Suzuki, a general manager at SBI Securities

With low interest rates expected to continue for some time, the IPO market should continue to attract funds, he said.

Japanese stocks overall lagged in the pandemic recovery, with the Topix not erasing its year-to-date loss until November, months after US and Asian peers.

The Tokyo Stock Exchange's Mothers Index of startups was a notable exception, with a gain of around 30 per cent on the year, thanks to its heavy weightings of biotech and Internet names, as well as the surge in retail investing.

A final listing set for today pushes the number of companies going public in Japan in 2020 to 94, up by four from the previous year, even with a pandemic-driven drought from early April to late June.

About 70 per cent were listed on Mothers. The overall value was small, with companies raising a total of US$3.3 billion, and no single deal worth more than half a billion dollars. That compares with US$181 billion raised in the US and US$51 billion in Hong Kong.

Kioxia Holdings in September decided to postpone what would have been Japan's largest offering of the year, at up to US$2.9 billion, due to market uncertainty amid US-China trade friction. Investors will be watching whether the Toshiba-affiliated chipmaker decides to try its luck again in 2021.

The biggest IPO in Tokyo this year was mushroom cultivator Yukiguni Maitake, which raised US$409 million, followed by musical instruments maker Roland and business consulting provider Direct Marketing MiX.

In the absence of blockbuster deals with international appeal, local retail traders helped pick up the slack. Individuals accounted for 20 per cent of total trading value on the Tokyo Stock Exchange this year, up from about 16 per cent in 2019.

"IPOs have helped drive retail investor turnover," said Shoichi Arisawa, an analyst at Iwai Cosmo Securities. "It's helped money come back to growth stocks and given life to the startup market."

BLOOMBERG