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The number of initial public offerings in which initial quotes fell short of the shares’ actual IPO price rose nearly sevenfold to 20 in 2006 from three in 2005, according to an online provider of IPO share-price data.

IPO Tokyo said the 20 were among 188 firms that went public in 2006 at bourses for startup firms, including the Tokyo Stock Exchange’s Mothers market and the Nagoya Stock Exchange’s Centrex section.

The figure was the highest number of IPOs to fall short of their target prices since 2002, when 23 newly listed firms failed to hit their targets.

Analysts attributed the weaker numbers to greater skepticism on the part of individual investors regarding IPO stocks, in response to flagging share prices on the Mothers and other startup markets.

Share prices on those markets plunged after the arrest last January of Takafumi Horie, then president of Internet services firm Livedoor Inc., and other Livedoor executives on suspicion of accounting fraud.

The weakness dogged the markets throughout 2006.

“Individual investors stiffened their standards for companies and concentrated their attention on performance, rather than on just the image of the companies or the news such companies made,” an official at a major brokerage said.

Although many market observers expect stock markets to climb this year, speculation is rife that IPOs will continue to disappoint investors, particularly since numerous startups are competing for funds.

Looking back at last year, the number of IPOs where the initial quotes fetched by newly listed stocks fell short of their target prices began increasing around September, IPO Tokyo said, with 11 underperforming IPOs in November and December alone.

Conspicuous among them were electronics maker KFE Japan Co. and Internet firm Members Co., both of which went public on the Centrex.

KFE Japan made its debut Nov. 20 and Members on Oct. 11. KFE Japan fetched an initial quote of 111,000 yen, down from the IPO price of 190,000 yen, while Members’ initial price fell short of its IPO price by 40 percent.

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