Listing
Listing
Update : Mar. 06, 2007
1. Significance of Listing
In general, a company whose stock is listed on a stock exchange (hereinafter a "listed company") is said to enjoy the following benefits:
(1) A listed company enhances its ability to raise funds by clearing the way for direct financing, including raising capital through a public offering issued at market price and/or the issuance of warrant bonds and other securities. By expanding its fund-raising ability, a company can improve and enhance its fundamental quality.
(2) Becoming a listed company leads to increased public awareness and status as a company with future potential, thereby improving corporate publicity while enhancing social trustworthiness with clients, financial institutions, and others. In addition, executives and employees alike grow to appreciate the company more, which is reflected in its business performance and allows it to secure highly capable manpower.
(3) By going public, the organizational structure of a company shifts from individual management to a more organizational style of operation, thereby enhancing the internal management framework.
While a listed company can enjoy the above advantages, it must also bear new social responsibilities and obligations such as being required to make earnings announcements and disclosing corporate information timely and appropriately.
2.Initial Listing
A company applying for an initial stock listing is required to meet certain numerical criteria outlined in the "Criteria for Listing Examination of a Stock." Once these criteria are met, the Tokyo Stock Exchange (hereinafter the "TSE") conducts an examination of the applicant company, focusing on whether it can disclose corporate information, etc. appropriately, and whether it is carrying out its business in a fair and faithful manner. Based on the results of the examination, stocks deemed appropriate for listing are listed on the TSE.
3. Classification of Listed Stocks
Both domestic and foreign stocks are listed on the TSE. Most of the listed stocks are classified as 1st Section issues or 2nd Section issues, while other stocks are listed on Mothers, a market for emerging companies with high growth potential.
When receiving an application for 1st Section assignment from a listed company in the 2nd Section, the TSE conducts an examination at the end or mid-term point of each fiscal period and analyzes the state of the applicants' share distribution, trading volume situation, etc. to determine whether the applicant meets the criteria for reassignment as outlined in "Criteria for Assignment of a Listed Stock to the 1st Section." Issues which meet these criteria are assigned to the 1st section. In principle, newly listed domestic stocks (excluding Mothers issues) are assigned to the 2nd Section. However, if the TSE has received the relevant application from the initial listing applicant, the exchange may assign stocks that are expected to have particularly high liquidity to the 1st Section at the time of listing.
If a 1st Section issue falls under the criteria regarding the number of shareholders, etc. outlined in the "Criteria for Reassignment of a Listed Stock from the 1st Section to the 2nd Section," the TSE reassigns the issue to the 2nd Section.
4. Supervision of Listed Companies
In addition to setting forth procedures for alteration listing, etc., in order to properly oversee listed securities, the TSE obligates listed companies to make timely and appropriate disclosure of corporate and other information under the "Rules on Timely Disclosure of Corporate Information by Issuer of Listed Security and the Like," should an event occur that has a significant impact on investment decision-making. Through these rules, the TSE conducts meticulous listing supervision so that corporate information is disclosed to investors in an accurate, prompt, and fair manner.
5. Delisting
In the event that fair price formation has become prohibitive due to situations such as an insufficient amount of a listed stock's absolutely floating shares or the listed company falling into a state of bankruptcy, the stock falls under the "Criteria for Delisting of Stock," and is delisted accordingly.
If a listed stock is likely to fall under the Criteria for Delisting of Stock, the TSE assigns it to the Post for Issues under Supervision to publicize this fact. If the decision has been made to delist a stock, the TSE assigns it to the Delisting Post to allow investors time to close their positions, etc. regarding the stock for a certain period (one month in principle).