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Equities

Japanese IPOs set for high water mark this year

IT and service sectors lead charge toward post-crisis peak

The number of IPOs on the Tokyo Stock Exchange has been trending upward in recent years.

TOKYO -- The number of initial public offerings in Japan is on pace to hit a post-financial crisis high this year as many young companies bank on the publicity of a listing to attract hard-to-find workers.

Around 90 to 100 companies will go public in 2018, Nomura Securities estimates, reflecting a general consensus among the top four lead underwriters that handle more than 70% of new listings. Daiwa Securities, Mizuho Securities and SMBC Nikko Securities round out the group.

The high end of the range would make this year's IPO roster the biggest since 2007, when 121 companies debuted on the market.

The first one out of the gate this year is M-mart, which operates an e-commerce platform that distributes commercial-use food products. It listed on the startup-heavy Tokyo Stock Exchange's Mothers board on Friday.

M-mart is so in demand that its initial share price has yet to be determined. The stock remained bid-only on Friday, last quoted at 2,852 yen, or 130% above the initial offer price of 1,240 yen.

Many in 2018's IPO class will come from the information technology or communications sectors. The biggest listing of the year is expected to be SoftBank Group's float of its domestic wireless unit, SoftBank Corp. The Nikkei reported that the group plans to sell about 30% of the subsidiary's outstanding shares on the TSE's first section.

The move could infuse SoftBank Group with about 2 trillion yen ($18.7 billion), or more than three times all the funds raised through IPOs throughout last year.

When it comes to IPOs of Japanese household names, Mercari would also receive top billing. The Tokyo operator of the popular flea-market app is set to go public in June. Other probable tech floats include freee, which offers cloud-based accounting software, news app provider SmartNews and crowdsourcer Lancers.

From the service sector, talent staffer Bizreach and bus company Heisei Enterprise are possible candidates. QB Net Holdings, which runs the QB House chain of no-frills barber shops, will float on either the TSE's first or second section on March 23.

Japan produced more than 100 IPOs annually through the early to middle 2000s. The global financial crisis in 2008 severely undercut that pace, though the numbers have been staging a recovery.

The recent upward trend comes with the backdrop of the country's pronounced labor shortage. Many companies are listing to raise their name recognition and secure talent, according to SMBC Nikko Securities. The increasing number of startups receiving venture capital support during the past few years appears to be contributing to the contingent considering going public.

At this stage, the market environment is decidedly favorable for IPOs. Among startup-heavy indexes, the Nikkei Jasdaq Stock Average marked an all-time high on Jan. 26. Although the blue chip Nikkei Stock Average has sunk 4% year to date, the Nikkei Jasdaq is up 4%.

Among the 90 companies that floated last year, the opening price exceeded the offering price more than 90% of the time.

Meanwhile, the TSE is requiring companies seeking IPOs to be more rigorous in their earnings projections. Previously, a series of newly listed components sharply downgraded their forecasts almost immediately after floating. Many observers also believe that the IPO count cannot go much beyond 100 in light of the shortage of accountants at auditing firms.

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