Companies are stepping up efforts to clear requirements for listing on the top-tier market the Tokyo Stock Exchange will create in the reorganization it plans for April 2022.
The TSE will realign its current four trading markets into three — Prime, Standard and Growth. Companies listed on the top-tier Prime market will likely be in a better position than others to raise funds and recruit workers.
The TSE has set listing standards for the three new markets. Key listing thresholds for the Prime market are at least ¥10 billion in market capitalization of tradable shares, with their proportion of outstanding shares set at 35% or more.
Unlike shares that are owned by major shareholders and issuers, which are less likely to be sold, tradable shares, if enough of them are available, help activate trading and have stock prices reflect investor assessments of listed companies.
Among the 2,191 companies listed on the first section of the TSE as of the end of June, 664, or about 30%, of them did not meet the criteria based on tradable shares. Ineligible first section companies will still be transferred to Prime as an exception if they submit reports to the TSE by year-end detailing how they plan to meet the listing standards. But if they fail to clear them after a certain time, they may be delisted from the top market.
An increasing number of companies listed on the first section, therefore, are calling on major shareholders to sell their holdings. In February, for example, Toyota Boshoku Corp., a leading automotive interior component manufacturer, asked Toyota Motor Corp. to sell some of its holdings. After Japan’s biggest automaker agreed to the request, the proportion of tradable shares at Toyota Boshoku is expected to reach 35%.
Zozo Inc., operator of the Zozotown e-commerce website for apparel, cleared the 35% threshold by buying shares from founder Yusaku Maezawa and allotting them to general shareholders.
Midsize companies are striving to meet listing standards for the Standard market — ¥1 billion or more in market capitalization of tradable shares, with their proportion at a minimum 25%.
“As the brand power created through listing on the TSE means a great deal to companies outside metropolitan areas, they will reach a crucial stage down the road” in efforts to meet the listing criteria, said an executive at a major brokerage house.
C.I. Medical Co., a sales company of dentistry-related materials in Hakusan, Ishikawa Prefecture, listed on the TSE’s Jasdaq market for startups, hopes to shift to the Standard market. Although Kiyoto Shimizu, president of C.I. Medical, and other big shareholders intend to sell their shareholdings, the company appears unlikely to satisfy the criteria soon and so is considering submitting a report to the TSE on how it plans to do it.
The TSE will announce the names of companies listed on each of the three new markets in January.
Toward the end of this year, many companies are expected to announce which new markets they aim to be listed on and how they plan to meet the listing requirements, Atsushi Kamio, senior researcher at Daiwa Institute of Research Ltd., said. “Their action plans will attract great interest,” he added.
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