Mothers: Caring for Internet Infants in Japan

Back to Contents of Issue: January 2000

by Noriko Takezaki

The Tokyo Stock Exchange (TSE) launched a new stock market for venture companies, called Mothers (Market of the High-growth and Emerging Stocks), in November 1999. Mothers' main objective is to facilitate fund raising for venture companies in Japan-companies expected to play a key role in Japan's economic recovery.

Until last year, the TSE-many of whose officials are ex-MOF drones-was facing sharp criticism due to its lack of animation and overall pathetic attempts at encouraging new companies to do an IPO. The reaction? An un- precedentedly fast launch of the new Mothers market, as the TSE moved quickly to avoid any blame for prolonging Japan's miserable economic situation. The TSE explained that Mothers was named to indicate its intended role in fostering startups and venture companies, and sure enough, a number of Internet infants are finding their way home.

"Together with the launch of Mothers, Japanese companies' methods of raising funds are changing," said one TSE spokesperson. "Japanese companies traditionally raised funds largely from banks and other financial institutions, and no one considered doing an IPO anytime soon after establishment. However, many new startups now plan to do an IPO soon after launch, like in the U.S." In addition, the stock market environment here is evolving. Nasdaq Japan is scheduled to open this year, and if Mothers had delayed its launch, it would have lost first-mover advantage. Competing against an already established, well-known name like Nasdaq would have been a tough go. "The era when stock markets selected companies is over. Now, companies select the market based on their best chances for profit," said the TSE spokesperson.

To attract venture companies, Mothers is offering U.S.-style listing rules not seen before in Japan, including allowing young, profitless companies to list and requiring merely that companies commit to quarterly reporting. IPO fees are as little as ¥1 million, half that on other markets. In addition, Mothers will offer information services to companies who plan an IPO on the market, including seminars covering pre-IPO preparations and regular e-mail newsletters.

Noriko Takezaki is senior editor at J@pan Inc.

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