Japan's IPO Boom May Soon Go Bust
Friday, December 29, 2006SUSIE GHARIB: The economic recovery in Japan this year has fueled a booming market in initial public offerings. But while there were some big successes in the market, several high-profile IPOs by U.S. private equity firms ended in tears. As Lucy Craft reports from Tokyo, some observers say the bull market in new listings may have run its course.
LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: By sheer volume of listings, Japan's IPO market was pumped up this year. Wiping out most other super-premium debuts was Idemitsu Kosan, a leading oil refiner and operator of gas stations. Idemitsu was among nearly 200 Japanese companies going public this year a 20 percent jump in listings year-on-year. Founded almost a century ago, its Apollo logo familiar across the country, Idemitsu was an exception amidst the slew of mostly new and unknown companies debuting in 2006.
EDWIN MERNER, PRESIDENT, ATLANTIS INVESTMENT RESEARCH: You had brokers who were looking for new clients, and you also had companies who were watching their competitors maybe or friends who were listing and they were saying, why can't I list, too?
CRAFT: Also driving the IPO boom is hotter competition among Japanese equity markets, some of them going public themselves.
TAKASHI NISHIBORI, DIRECTOR, TOKYO IPO (THROUGH TRANSLATOR): The only way for stock markets to boost revenue is by attracting more listings.
CRAFT: The smash hit of the year, Japan's social-networking sensation, known as Mixi.
MERNER: Mixi was a hot one. That was a big success. It did very very well and of course it's a fast-growing company, and people like the concept, this role-playing and you can be somebody else. You can be glamorous. You can be pretty. You can be handsome.
CRAFT: Japan's answer to myspace, Mixi allows users to share blogs, hobbies and music by invitation only, an asset in privacy-obsessed Japan.
YOICHI KOWARI, MANAGER DIRECTOR, MIXI INC.: Going public was a very good move. It has raised our profile and helped us in recruiting.
NISHIBORI: Mixi's market cap was bigger than that of a TV network, although they have only six million subscribers. But since they cater to the hyped youth market, they were extremely overvalued.
CRAFT: But several huge IPOs by U.S. owners hit sand traps this year. Observers blame a glut of IPO listings and uncertain growth prospects for the companies themselves. Golf course operator Accordia Golf, restructured by Goldman Sachs, was a flop. And Aozora Bank, floated by a U.S. private equity firm, also tanked.
NISHIBORI: The IPO was a total bust. The bank didn't list to gain equity financing, but merely to create capital gains for its institutional investors. So it was a badly flawed plan from the start.
CRAFT: In 2008, Japan is set to adopt its own version of Sarbanes- Oxley disclosure rules. Experts say that means the number of IPOs here will sharply drop over the next few years. Lucy Craft, NIGHTLY BUSINESS REPORT, Tokyo.
