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Equities

Most Japan IPO stocks trading above offering price

Individual investors back startups amid buoyant market

TOKYO -- Share prices have climbed for companies going public in Japan in 2017, thanks to an inflow of money from individual investors and a bullish outlook toward startups.

A company's initial public offering often generates early popularity that burns out soon after and sends share prices tumbling. But this year newly listed companies are sustaining the gains, with 32 out of 35 such businesses trading above their IPO price.

The initial trading price for Ecomott, which listed Wednesday, was 54% higher than its IPO price. DM Solutions received only buy orders upon listing Tuesday, eventually reaching an initial trading price Wednesday about triple its IPO price.

As individual investors widened their hunt, issues like Macromill and Internet Infinity recorded their highest share price since listing in March.

"While major stocks barely budge up, IPO issues are drawing attention as their prices continue to ascend," said Hideyuki Suzuki from SBI Securities.

Wednesday's closing price matched the offering price for one company, while Sushiro Global Holdings and Lixil Viva were the only two that traded below. Fifteen companies beat their initial trading price.

Better conditions for individual investors have benefited these shares. The Nikkei Stock Average has improved 5% since the start of the year, and the TSE Mothers Index has soared 27%. The unrealized profit/loss margin ratio, a yardstick for an investor's financial situation, improved for the fourth straight week to minus 7.76% as of last weekend.

An investor's unrealized gains grow if the price of a stock purchased at a public offering rises after listing. As share prices for recently listed issues remain firm, "individual investors are searching for stocks to invest their gains in," Tomoichiro Kubota from Matsui Securities said.

Many newly listed companies are trading at 20 to 40 times projected per-share earnings.

"Compared to popular issues in emerging companies [that are trading at hundreds of times projected per-share earnings] it does not feel like overheating," said Katsumi Udagawa of Ichiyoshi Securities. "It seems that individual investors will actively continue their search."

(Nikkei)

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