IPOs, share issues down in market slump

Japanese companies are shying away from stock markets to raise funds amid the fallout from the U.S. subprime loan crisis, a leading financial research firm says.

The plunge in stock prices in recent months prompted many Japanese companies to seek help mainly from banks in their fund-raising efforts.

In the first three months of 2008, only 44 stock issuance transactions by Japanese companies were recorded in Japan, according to business research firm Thomson Financial.

It was the lowest figure for a January-March period since the U.S. research company began compiling statistics in 2000.

It also marks the second-lowest number since 42 in April-June 2003, when the Nikkei stock index hit its lowest point since the collapse of the asset-inflated economic boom in the early 1990s.

In the first quarter of 2008, the Nikkei stock index shed nearly 3,000 points.

The trend reflects pressures on Japanese companies rattled by the turmoil in global financial markets caused by the subprime mortgage crisis.

An official with a leading brokerage said more companies are turning to banks for loans.

Thomson Financial counted initial public offerings (IPOs) and issuances of common shares and bonds that can be converted into stocks.

In the first quarter of 2008, the number of new listings dropped to 22, less than half the 45 in the same period the previous year, according to Thomson Financial.

Start-ups were particularly hard hit. Only seven went public on the Jasdaq Securities Exchange, down from 19 during the first quarter of 2007.

The Hercules market for start-ups at the Osaka Securities Exchange saw only three new listings, down from 11 a year ago.

Two companies postponed their IPOs on the Tokyo Stock Exchange due to falling share prices.

Companies typically avoid new stock issuances when share prices are in a downturn to avoid diluting the value of existing shareholders' holdings.

When stock prices slump, a company must issue more shares to raise the amount of money required.

When share numbers increase, per-share value declines.

Hideo Kumano, chief economist at Dai-ichi Life Research Institute, said start-ups will have a hard time finding funds because they cannot count on bank loans.

"Established companies can easily switch to bank loans if their business performance is strong," Kumano said.

"But for venture businesses, raising funds is tough," he said.(IHT/Asahi: April 3,2008)