Stricter Listing Maintenance Standards to take Effect from 2030
The Tokyo Stock Exchange (TSE) is set to implement a major reform of the listing maintenance standards for its Growth Market. Starting in 2030, companies will face delisting if their market capitalization remains below ¥10 billion five years after their initial listing.
Currently, delisting occurs only when a company’s market capitalization falls below ¥4 billion after ten years on the market. This revision significantly raises the bar. After a public comment period and related procedures, the new standards are expected to be officially enacted within this year. According to TSE data, as of end-2024, roughly 70% of the 610 companies listed on the Growth Market have a market capitalization below the ¥10 billion threshold.
Challenges That the TSE Growth Market Is Facing
In April 2022, the TSE reorganized its market divisions into three categories: the Prime Market, the Standard Market, and the Growth Market. The Prime Market targets globally active companies; the Standard Market serves companies with adequate scale and governance; and the Growth Market caters to high-growth startups.
However, despite the passage of time since the reorganization, the Growth Market has been criticized for not yet fully achieving its original objectives. The TSE envisioned the Growth Market as a hub for high-growth startups, but in reality, that vision has not been fully realized.
A key concern is the phenomenon of “small-scale listings.” This occurs when startups go public prematurely—while still small in scale—and consequently fail to attract institutional investors. As a consequence, both their business performance and stock prices tend to stagnate after listing. A key driver is pressure from venture capitalists (VCs), who often push for early IPOs. VCs frequently include IPO timelines in investment agreements, pressuring companies to list in order to realize returns.
Consequently, rather than using IPOs to raise diverse growth capital, many companies peak in valuation at listing, turning the Growth Market into an exit venue for founders and investors. To realign the market with its original purpose and reinforce the principle that “listing is not the finish line, but the starting point,” the TSE has tightened its standards.
The ¥10 billion threshold was set based on institutional investor feedback, reflecting the TSE’s goal of drawing more institutional capital into the Growth Market.
Options for Companies Falling Short of the ¥10 Billion Threshold
What options do companies have if they fall short of the ¥10 billion threshold after 2030? Several paths are available: First, they may delist voluntarily. Second, they may transfer to the Standard Market, where the listing maintenance standards stipulate that the market capitalization of “tradable shares”—those available for trading by general investors—must be at least ¥1 billion. A number of Growth Market firms already qualify. Third, they may move to a regional exchange outside Tokyo.
Shifting Away from IPO Dependence
As the TSE raises the bar, startup exit strategies are expected to evolve. Traditionally, IPOs have been the dominant exit route. Going forward, alternatives such as M&A and secondary markets for unlisted shares are likely to gain prominence. While Japan’s secondary market remains nascent, the stricter standards may catalyze its development and maturation.
