TOKYO -- New stock market listings in Japan are on track to fall 30% from a year earlier in the first half of 2022 as a confluence of global factors makes international investment scarce.
As of Thursday, 37 companies were expected to have initial public offerings between January and the end of June, down from 53 in the same period last year. Not since the 63% drop in the first half of 2009 have IPOs fallen so sharply.
U.S. interest rate hikes and the impact of Russia's invasion of Ukraine have squeezed flows of foreign investment into Japan, taking some of the life out of what was an active IPO market last year.
"The supply of funding from overseas institutional investors has decreased, making it difficult to pull off large-scale listings," a market source said.
The information and communications sector was among the hardest hit. IPOs in this category shrank to 27% of total new listings, compared with 40% in 2021. Staffing and other service companies made up the biggest share of new listings in the first half, at 38%.
The 25 IPOs through May raised 11.7 billion yen ($86.5 million), down more than 80% from January to May of last year. Seven companies, including SBI Sumishin Net Bank, postponed listings in the first half -- more than three times as many delays as in the same period last year.
Venture capital and other sources of funding outside the stock market are also showing signs of drying up. A tech company in Tokyo that raised around 2 billion yen in the previous year has seen its funding prospects dim.
"We have no choice but to curb our upfront investments in marketing and hiring," a member of the management team said.
A similar IPO slump is unfolding overseas . IPOs tracked by Refinitiv in January to May fell 40% in number and 58% by value from the same period last year. Both were the biggest declines for this period since 2009. The Americas saw a 90% plunge in value, while Asia suffered a nearly 20% drop.
Even before the Ukraine war, the stock market was growing less tolerant of tech companies that have good growth but consistently lose money.
"Institutional investors have begun to pay more attention to the timetable for becoming profitable," said Hayato Takei, director of equity capital markets and syndication at Mizuho Securities. Unlisted companies "need to show they can log stable profits."
Japan still has many companies looking to go public, but they face broader headwinds including a weak yen and high commodity prices, market watchers say. Takeshi Matsushita, deputy head of the public underwriting at Nomura Securities, forecasts 90 to 100 listings in Japan this year.