Japan¡¯s initial public offerings have become less profitable to flip on their trading debut, a trend investors have welcomed as an indication of higher quality companies coming to market.
IPO buyers received a median return of 26.3% in 2025 if they sold at the opening price, the lowest profit since 2012, according to Bloomberg-compiled data.
That underscores better IPO pricing in Japan, according to Takashi Kaneko, professor emeritus at Keio University who studies stock market listings. The Tokyo Stock Exchange¡¯s plans to push for stronger growth in the startup market section resulted in fewer small-sized initial share sales, transactions that are often priced at a deeper discount than other first-time offerings.
The fact is tiny IPOs are disappearing in the country with the number of such deals falling to a 12-year low in 2025. Tokyo¡¯s bourse has plans to raise the bar for companies to remain listed on the startup market to promote more growth, amid concerns that newly listed firms often underperform.
Japan¡¯s IPO pops ¡ª in other words, the first-day rise in price ¡ª have stood out globally as the country¡¯s new listings have traditionally been dominated by small companies. These returns have dwarfed those in other major markets like Hong Kong, India and the U.S..
But despite the stellar listing performance, the initial lure tends to fade in Japan and its newly listed companies largely fail to hold on to the early gains. IPO experts including investors and bankers say that companies with lower growth potential tend to encourage flipping, rather than holding on long-term.
For 2025, newly listed stocks in Japan had a median closing price on their trading debut that was higher than the open, the first such time this has happened since 2012. Trading debutants saw their share price rise a median 29.5% over their IPO price on average at the end of the first-trading session. This could mean that investors were holding on to their shares rather than merely flipping them.
The trend suggests there could be more listings by firms that are able to convince investors of their growth potential, Keio University¡¯s Kaneko said.
¡°The story has changed that once you get much underpriced small IPOs and flip shares at listing would always give returns,¡± he said. ¡°Japan is at its great turning point to grow as a healthy capital market.¡±
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