Japan to Review IPO Culture

Outrage over a dip in confidence over the stock market has prompted Japan’s main exchange operator to address the issuing processes of initial public offerings (IPOs).

Head of Japan Exchange Group, Atsushi Saito, has said that Japan Exchange Group, JPX, will call on firms searching for listings to disclose more information on their earnings forecasts. Accounting practice will also be more intensely scrutinised.

The measures have come into being after several Japanese companies this year revealed accounting discrepancies or revised their guidance in the wake of going public on the Tokyo Stock Exchange (TSE).

Some IPOs have elicited suspicion over how thoroughly firms are checked in a climate characterised by a rising demand for start-ups seeking quick money. Mr Saito also asserted his embarrassment “that investors are feeling deeply disappointed” with the current situation.

Online games developer, Gumi, raised eyebrows during March by announcing an expected operating loss of Y400m ($3.3m) barely three months after forecasting a profit of Y1.33bn when the firm went public in mid-December. A potential embezzlement case at Gumi’s Korean branch has further undermined confidence.

Investors in Japanese IPOs have said irregularities have become more visible of late, with an increase in the number of listings as the Nikkei Stock Average experienced a 15-year high; there were 84 new listings in Japan last year.

A veteran hedge fund manager has speculated that the trend has contributed to brokerages, institutional investors and companies “becoming bullish”, potentially prompting acceptance of companies that may have not been given the green light in less favourable market climate.