Report: Underpriced IPOs Could Be an Antitrust Violation in Japan

Japan’s competition regulator is expected to warn brokerage houses that undervaluing initial public offerings (IPOs) on the stock exchange could be a violation of the nation’s antimonopoly law, sources told The Japan Times.

The Japan Fair Trade Commission (JFTC) is planning to issue a report outlining efforts to assist companies newly listed on the Tokyo Stock Exchange to gain financing, the newspaper reported.

Typically, share prices on the first day of trading in Japan exceed IPO prices by wide margins, larger than in the United States and Europe.

Last summer, Nikkei Asia reported the JFTC commenced an investigation over whether securities companies and underwriters are pricing IPO shares fairly.

The action was taken, the report said, after regulators observed deals where the difference between the per share offer price prior to the listing and opening share prices was substantially larger than in Europe and the U.S.

While the listing company raises a smaller amount of capital, investors are thrilled with what has been called “first-day pop,” the news outlet reported. Underwriters like the practice because it attracts financial support from investors.

But the investigation by JFTC could allow the underwriters to increase pricing for startups and allow them to raise more money since Japan trails the rest of the world in cultivating tech startups.

IPOs are not the only thing on Japan’s radar.

In December, Japan’s Financial Services Agency (FSA), the government overseer of banking, securities and exchange, and insurance sectors said it will propose legislation in 2022 to make it so only banks and wire transfer companies can issue stablecoins, according to a Nikkei Asia report.

See also: Japan to Propose Limiting Stablecoin Issuance

The agency said limiting the stablecoin issuance will limit risks, as banks have to protect customer assets by law, and the agency also plans to make more strict regulations to combat money laundering.