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Impact of the market structuring on the financial environment in regional areas

2022.01.31

Ryohei Hayashi

Ryohei Hayashi

President & Partner, DOGAN beta, Inc

Impact of the market structuring on the financial environment in regional areas
Ryohei Hayashi

Ryohei Hayashi

President & Partner, DOGAN beta, Inc

With respect to the market restructuring, I have been watching the progress with great interest since the establishment of the Advisory Group to Review TSE Cash Equity Market Structure in 2018. Our Group supports a wide range of companies from regional start-ups to listed companies. From such a standpoint, I’d like to make some comments specifically on possible impact on the financial environment in regional areas. To tell the conclusion first, I’m expecting two side benefits for both groups: the listed companies and start-ups.

The first benefit is that setting quantitative requirements for listing on the Prime Market will raise the viewpoint of listed companies in regional areas, thereby expanding their horizons. Even in the capital market, I always feel that regional companies are geographically disadvantaged in a greater or lesser degree. Yet, once they successfully get listed on the Prime Market by satisfying stricter listing criteria, I think they will draw increased attention from both domestic and foreign investors, and that will help them overcome the geographical disadvantage. Furthermore, by taking on such a challenge, I expect that regional companies will accelerate their shift to business management that is conscious of corporate governance and shareholders.

The second benefit is possible impacts on start-ups which aim at an IPO. The Growth Market has a listing criterion where a company with market cap of below 4 billion yen may need to exit the market, so I assume the screening for IPO takes into account such a threshold. According to the above-mentioned logic of a quantitative target, I think it has a positive impact on the start-ups. There are only a small number of cases where regional start-ups made IPOs within a short period from the establishment, but I anticipate that such cases will increase driven by this market restructuring. Aside from clearing the hurdle of 4 billion yen, it will become more important for companies to consider how to tell their equity story that is continued to be appreciated by the market after the IPO. We as a venture capital will need to play a role there, I believe.
The number of IPOs in 2021 is expected to reach 123 in all market segments, including 93 in Mothers. The number significantly increased compared to previous years, and I got an impression that it is a signal from the JPX that more IPOs will be approved after the market restructuring. That is very encouraging.

On a final note, I hope that the new market segments will create healthy markets that are more in accordance with global standards. Of course, our company will make earnest efforts to help more qualified regional companies get listed on suitable market segments.

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