This content is from: Local Insights

Japan

Market established for high-growth and emerging enterprises

Mothers (Market of the high-growth and emerging stocks) is the new market introduced by the Tokyo Stock Exchange (TSE) on December 11 1999 in order to provide easier funding for emerging companies with high growth potential and to offer a wider choice of investment instruments.

Mothers has the following four features.

(I) Liquidity. In order to secure liquidity of shares, a public offering of at least 1,000 trading units is required to take place by the day preceding listing, creating at least 300 additional shareholders, each holding at least 1 trading unit. For the same reason, the estimated market value for the time of listing must be at least ¥500 million.

(II) Innovation. The core business of the applicant and its corporate group must have the potential for high growth, either by being based upon new technologies and concepts, or by belonging to a high growth field.

(III) Speed. In order to provide quick funding for the new companies, the examination process by the TSE is shortened and simplified. In addition, profitability and durability of management will not be examined by the TSE.

(IV) Transparency. Companies are required, (i) to disclose quarterly business results and (ii) to hold analyst meetings at least twice a year for three years after listing in addition to the normal legal and timely disclosure.

Seven companies have already been listed on Mothers as of April 13 2000 and many more companies have either applied or are in the process of applying for listing. Most of these companies are related to information technology.

Before the introduction of Mothers by the TSE, the creation of Nasdaq Japan was announced on July 15 1999 with plans for its establishment by June 2000. Jasdaq stock market, which had been the most popular market for the venture companies before Mothers, is relaxing the requirements for listing. It seems likely that Japanese companies will now have a choice of three markets in the future.

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