TOKYO -- The Tokyo Stock Exchange will relax its rules on delisting and initial public offerings for an increasing number of companies whose earnings have been crushed by the economic impact of the novel coronavirus, Nikkei has learned.
Companies that have fallen into negative net worth, when liabilities exceed assets, will now have two years before their shares are delisted, up from one. The exchange will also be more flexible in applying criteria for judging the profitability of companies applying to list their shares.
The temporary measures come as the TSE seeks to avoid market uncertainty regarding corporate earnings.
The exchange plans to seek opinions from market participants by the end of March.
As for the new delisting safety net, the exchange will extend the grace period to two years if it judges the pandemic has caused a company's negative net worth.
Also, auditor opinions about companies expressed in annual securities filings to the Financial Services Agency will be interpreted less rigidly in judging a company's delisting. For example, a company to which an outside auditor has assigned a "no opinion" assessment, which is given when an auditor cannot judge whether a company's accounts have been properly created, will not be subject to further delisting scrutiny as long as it judges the coronavirus gave rise to the situation.
The measure comes in response to companies with subsidiaries in overseas locations that are heavily affected by the outbreak or where travel is restricted; auditing these companies has become difficult.
As for the relaxed IPO criteria, the TSE aims to disregard a temporary slump in income due to the pandemic when judging the advisability of a listing. Companies applying to IPO are normally required to show stable profits before they are allowed to list.
The exchange also intends to flexibly interpret auditors' opinions.