Initial public offerings hovered at high levels last year, but since the start of this year, many firms have either canceled or postponed planned listings and there have been moves to suspend bond issues.
With investors less willing to take risks amid a fall in stock prices triggered by Russia's invasion of Ukraine, among other factors, stagnating finances could deliver a blow to the global economy, which is still reeling from the COVID-19 pandemic.
According to the Tokyo Stock Exchange (TSE), six companies have canceled or postponed IPOs this year, the same number of such withdrawals in the whole of last year.
On March 7, SBI Sumishin Net Bank Ltd. announced it will postpone its TSE listing, which had been scheduled for March 24. The Nikkei Stock Average is down about 10% from the end of last year.
While investors are cautious about investing in stocks, it is not clear whether companies will be able to raise the funds they want through IPOs.
The situation is similar overseas. According to the Wall Street Journal, planned listings have been postponed by Efima PLC., a Finland-based cloud service provider, and Norwegian wind turbine installer Fred. Olsen Windcarrier.
According to Bloomberg news, the value of capital raised through IPOs in the two weeks following Russia's invasion of Ukraine totaled 110 million dollars in Europe, more than 96% down from the 2.8 billion dollars raised during the corresponding period last year.
In North America, it totaled 1.7 billion dollars, down about 93% from the 24 billion dollars raised a year earlier.
The impact of the Russian invasion of Ukraine has also spilled over to corporate bonds, the main way companies secure funds.
Long-term interest rates have risen globally since the start of this year due to a speculated interest rate hike by the U.S. Federal Reserve coupled with economic recovery from the COVID-19 pandemic.
Companies are less likely to attract market interest in their bond issues unless they guarantee higher yields than government bonds and other securities, which raises the costs of procuring funds.
Compounding the situation is the deterioration in investor sentiment due to the conflict in Ukraine. As a result, an increasing number of companies see little merit in issuing corporate bonds at this time.
Since last month, Japan Airlines Co., Eneos Holdings, Inc., and Aeon Mall Co. have postponed bond issues designed to raise funds for decarbonization measures.
The situation is the same overseas, with Spanish water management firm FCC Aqualia S.A. also deciding to shelve a planned bond issue.
"We want to issue bonds quickly to accelerate our decarbonization efforts, but it's hard to predict how much demand there will be from investors." said an official of a Japanese firm.
SMBC Nikko Securities Inc., which handles corporate bond offerings, had expected fiscal 2021 bonds to total 14 trillion yen.
However, the pace of issuance has slowed since the beginning of the year and there is a strong possibility the forecast will not be met, with the figure currently standing at 13.1 trillion yen.
If IPO listings and corporate bond issuances stagnate, funds will not flow to startups, which are the engines of economic growth. Growth areas such as decarbonization and digitization may also see investment evaporate.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
