Japanese companies are leaving the Tokyo Stock Exchange (TSE) at the fastest pace in over a decade, reflecting a surge in deals and management buyouts as they face more pressure to make better use of their capital.
The number of firms that delisted their shares from the TSE or announced plans to do so has reached 59 in the first half, rising from 51 a year earlier and marking the most on record for a comparable period, according to exchange data going back to 2014. If firms continue to exit the TSE at this pace, the figure for 2025 will exceed last year’s annual record of 94 companies.
The trend reflects the Tokyo bourse’s broad push to make the Japanese market more appealing for foreign investors by ensuring that listed companies offer high shareholder returns, while firms that aren’t meeting their goals face the threat of being taken off the exchange.
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The TSE has called on companies to pursue goals including improving their valuations and cutting overly close ties with other companies in the form of cross-shareholdings.
Those reforms made Japanese shares one of the world’s best performers in recent years while encouraging activist shareholders to demand even more changes from company managers. For investors, increased activism has boosted calls to raise returns with measures such as stock buybacks, while mergers and acquisitions have soared.
“The decrease in the number of listed companies as a result of the activation of the capital market is a welcome development,” said Hiroshi Matsumoto, senior client portfolio manager at Pictet Japan.
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Japan is following in the footsteps of overseas markets like the US and UK, where more companies have gone private over the last 20 years due to stricter rules to stay listed, as well as growth in private market financing.
The Tokyo exchange has emphasised since last year that its priority for listed firms is quality rather than a large number of companies.
“The TSE’s intentions are going as planned,” said Hajime Nakajima, managing director at Deloitte Tohmatsu Equity Advisory. Companies whose shares are considered cheap will increasingly become targets of M&A and management buyouts, and “more and more of them will exit the market,” he said.
The number of listed companies on the Tokyo bourse fell to 3,842 last year, marking the first decrease since the merger of the TSE and the Osaka exchange in 2013, according to TSE data, excluding figures from the Tokyo Pro Market. The number will likely fall further to 3,808 by the end of June, based on Bloomberg calculations of data, including figures from the exchange.
The TSE reorganised in 2022 its equity market into Prime — with the biggest firms, Standard, and growth — listing the smallest companies. Since then, the TSE has urged listed companies to improve corporate governance and take steps to bolster their value.
In addition, the transition period for companies that fail to meet listing standards expired at the end of March, and if they continue to fall short, they’re scheduled to be delisted in October 2026 at the earliest.
Many companies left the Tokyo exchange after being bought out by other firms and investment funds. ID&E Holdings, a construction consulting firm, became a wholly owned subsidiary of non-life insurer Tokio Marine Holdings, which saw business opportunities in its new unit’s disaster prevention and mitigation tactics.
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Guidelines that Japan’s Ministry of Economy, Trade and Industry released in 2023, suggesting best practices for corporate takeovers, have helped fuel the M&A boom.
In cases where both a company and its subsidiary were listed, a not uncommon arrangement in Japan’s share market that’s been criticised as leading to conflicts of interest, parent firms have bought out units to steer clear of governance concerns. The planned takeover by Japan’s biggest telecom firm, Nippon Telegraph and Telephone Corp, of its unit NTT Data Group Corp is one example of that.
As the costs of maintaining a public listing rise and activist shareholders push for more payouts and policy changes, takeovers of companies by management are climbing. I’rom Group, a company that supports clinical trials, teamed up with US investment firm Blackstone Inc. to take its shares private in one such instance.
Tao Zhiyuan, a portfolio manager at global asset management firm AllianceBernstein Japan, said that the country’s chemical sector has “many interesting niche-top stocks,” but a lot of them are too small for global funds to invest in. If Japan as a whole “sees an increase in the number of large, strong companies through M&A, the number of investment targets from a foreign perspective will increase,” he added. — Bloomberg
London woos Chinese listings as City fights IPO drought
London is seeking to attract more Chinese firms to list on its stock exchange as the city struggles with a shrinking equity market and a deal drought across Europe.
“We need to get more IPOs happening in London,” Chris Hayward, policy chairman of the City of London Corp, said in an interview from Shanghai. “We don’t want to lose business across the Atlantic.”
The authority for London’s Square Mile financial district can provide opportunities for Chinese firms to secure customers and funding in the UK and drive them to list in the city via its connect scheme with Shanghai, Hayward said. The city can also encourage UK firms to raise capital and list on the Shanghai Stock Exchange, he added.
China launched its stock connect programme with the UK in 2019, allowing listed companies to issue depository receipts on each other’s exchanges. It later extended the scheme to Switzerland and Germany. Six years on, only a handful of Chinese firms, including Huatai Securities, have listed in London, raising a total of US$6.6 billion ($8.4 billion) with muted trading.
Beijing and London vowed early this year to deepen economic and financial ties, promising efforts to boost the China-UK stock connection.
“You’ve got to proactively go out there and encourage listings on your exchange,” said Hayward, drawing lessons from Hong Kong’s success in igniting a boom in initial public offerings in the first half of this year. Hayward, who was in Shanghai this week for China’s annual financial Lujiazui forum, is travelling to Hong Kong later in the week for IPO discussions.
Hong Kong’s share-sale bonanza this year saw new listings and additional offerings fetch more than US$27 billion as of early June. That eclipsed annual totals in the last three years and is the most since records were reached in 2021, based on data compiled by Bloomberg.
The London bourse has seen only four IPOs either pending or trading this year as its valuation discount to global peers deters firms. As a major offshore yuan hub, London has also collaborated with China’s central bank to support the currency’s internationalisation.
London set up a working group with the People’s Bank of China in 2018 to monitor the yuan market in the city. The authority has been urging global asset managers to launch new yuan products to boost the currency’s use, said Hayward.
He downplayed the potential impact that the UK’s recent tax for wealthy non-domiciled residents and its immigration crackdown could have on London’s appeal as a global financial centre while urging efforts to resolve the non-dom issue.
“I would encourage the government to continue to review this matter,” he said. “It’s important to us to try and keep wealth creators in this country.” — Bloomberg
