The Tokyo Stock Exchange (TSE) has chosen more than a dozen promising Asian startups for a program that offers support for initial public offerings, looking to reverse a steep decline in listings by foreign companies.
The exchange’s Asia Startup Hub, launched in March, provides advice on a broad range of topics for potential IPO candidates. Around 50 Japanese companies including brokerages, banks, law firms, and accounting firms have partnered in the effort.
Fourteen foreign startups were chosen recently to receive priority support toward a TSE listing.
Among them is South Korean unicorn Ridi, which runs a webtoon app. The startup is valued at USD 1.33 billion, according to CB Insights, and counts Singapore state fund GIC among its investors.
Another Asia Startup Hub participant is Malaysia’s Aerodyne Group, which combines artificial intelligence with drone technology to offer services in infrastructure inspections and farming. Singapore-based Tricog Health provides remote electrocardiogram analysis powered by AI. The service is used by medical professionals in India and other markets.
The TSE is looking to raise the profile of its startup-heavy Growth market by attracting high-valuation startups from across Asia and institutional investors with them. The Growth market index has persistently underperformed against the benchmark Nikkei Stock Average. Listings tend to be small and followed by lackluster growth.
The bursting of Japan’s asset-price bubble in the 1990s and the prolonged economic downturn that followed weakened the Tokyo market’s attraction for foreign multinationals. The TSE boasted 127 foreign companies in 1991, but just six were listed at the end of 2023.
The TSE hopes to draw Asian companies by offering higher liquidity and market capitalization than other startup-focused markets in the region. The TSE Growth market’s trading value totaled USD 273 billion last year, while Hong Kong’s comparable value was USD 5 billion and Singapore’s equivalent was USD 1 billion.
By market cap, Tokyo stood at USD 48 billion at the end of 2023, compared with USD 7 billion for Hong Kong and USD 6 billion for Singapore.
“Many Asian companies seek funding from Japanese retail and institutional investors,” said Kenya Matsushita, a managing director at Daiwa Securities involved in IPOs by global companies.
A major motivation for listing in Japan is the prospect of allying with a Japanese company.
Pops Worldwide, a Vietnamese platform that distributes digital content such as animation and music, aims to list on the TSE in 2027, said Fabien Lotz, the COO. The company expects to increase contacts with influential investors through the Asia Startup Hub and launch businesses in Japan with new partners, he said.
Foreign companies expressing interest in a TSE listing have increased by more than 50% over two years, Mitsubishi UFJ Trust and Banking reports, reaching 89 as of the end of September. Nearly 20 foreign firms are planning Tokyo IPOs in fiscal 2024 to 2026, the company said.