Over 80% of around 2,200 companies currently listed on the Tokyo Stock Exchange’s first section are expected to join the new top-tier “prime” section under the TSE’s market reorganization in April next year.
Of them, nearly 300 companies do not meet the listing standards for the prime section, but they can still be listed on the new section on a temporary basis.
Some companies are looking to move to the new mid-tier “standard” section from the TSE’s first section.
The deadline for companies to choose which market they will join under the realignment is set for Thursday, with the TSE releasing the results of screening on Jan. 11.
Under the reorganization, aimed at encouraging more investments by clarifying each section’s characteristics, the existing first and second sections and the Mothers and Jasdaq markets for startups will be reorganized into the prime section, the standard section and the “growth” section for startups.
Companies on the prime section will need to have a minimum required market capitalization of ¥10 billion in free-floating shares and at least 35% of all outstanding shares in freely tradable shares.
Companies will be able to stay on their desired market section for the time being even if they are not qualified, if they submit a plan to fulfill such requirements.
According to Mizuho Trust & Banking Co., a total of 294 companies had released plans to move to the prime section as of Tuesday.
Although many businesses have not yet met the requirements to be listed on the new section, mainly in terms of freely tradable shares, others have also pointed to the obstacle of disclosing climate change risks encouraged in the TSE’s corporate governance code, Mizuho Trust said.
In their plans, companies have said that they will implement various measures, such as disclosing more information and unwinding cross-shareholdings. Some have also come up with measures directly appealing to investors, including improving shareholder returns.
With some plans covering around eight and a half years, however, companies may be forced out of the prime section if they are still unable to meet the listing requirements during the transition period, which will be set soon by the TSE.
Meanwhile, 287 companies currently listed on the TSE’s first section plan to join the new standard section.
Some companies have shied away from the prime section’s strict listing standards, while others have apparently made a positive judgment after reconfirming where their business stands.
Online flea market operator Mercari Inc., currently listed on the Mothers market, is aiming to join the prime section in the future.
While the market reorganization will be conducted to enhance the TSE’s appeal among international financial markets, many experts believe that the change will not attract major attention from foreign investors as the sorting of companies under the new framework will be limited.
Still, an official at a U.S. asset management company said that the TSE is heading in the right direction and called for further improvements.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.