Digital Garage announced on the 14th that it has signed a memorandum of understanding with overseas investment firm Ion Pacific Holdings Limited for a strategic partnership aimed at advancing the secondary market, primarily in Japan.
The two companies will begin substantive discussions on strategically transferring key investment assets held by DG Ventures (DGV), Digital Garage’s investment subsidiary, into vehicles such as joint funds.
This partnership is positioned as central to Digital Garage’s initiative to transform its investment portfolio—which accounts for a significant share of the company’s balance sheet—from a direct ownership model to a “circulatory, capital-efficiency-focused model” utilizing funds and other instruments. If realized, the deal would pave the way for accelerating the approximately ¥30 billion (roughly $189.4 million) off-balance-sheet program outlined in the company’s medium-term management plan.
Partnership Objectives and Specific Measures
While its core business is payment platform services, Digital Garage has actively pursued startup investments. However, valuation fluctuations in its unlisted equity holdings have amplified earnings volatility, creating what the company has described as “management instability” and increasing the burden of explanation to investors. This strategic partnership provides an opportunity to fundamentally address these structural challenges.
Specifically, by transferring DGV’s major investment assets into joint funds or special purpose vehicles, the company aims to compress on-balance-sheet assets and reduce valuation fluctuation risk. The company also clearly articulated plans to strengthen resource allocation to core business areas including payments, data, and next-generation financial infrastructure.
Additionally, the two firms have identified the co-development of an AI-powered investment and analysis platform as a topic for consideration. Ion Pacific, which has bases in the U.S. and elsewhere, is an investment firm specializing in fund management focused on venture companies. By combining its expertise with the startup network Digital Garage has cultivated in the Japanese market, the partners aim to build a next-generation investment evaluation model.
Expectations for Secondary Market Revitalization
According to a report by The Nikkei, the partnership also includes plans to establish a fund specializing in secondary transactions. The secondary market, where unlisted shares are traded between investors, has expanded globally in recent years as infrastructure that facilitates diversification of startup exit strategies and circulation of investment capital.
In Japan, secondary trading of unlisted shares remains nascent, but a joint expansion of liquidity provision functions by Digital Garage and Ion Pacific could add depth to the market. Digital Garage’s announcement materials explicitly cite “advancing the secondary market, primarily in Japan, and expanding liquidity provision functions” as a pillar of the collaboration.
Uncertainty Remains at MOU Stage
That said, this announcement represents only the signing of a memorandum of understanding. Digital Garage noted that “execution details and impact on earnings are undetermined at this time,” meaning the specific timing of fund formation, management scale, and asset transfer schedule will depend on future discussions.
While the stock market has shown some appreciation for the balance sheet risk reduction and focus on core operations, cautious views have also emerged, with investors seeking to assess actual progress. How quickly Digital Garage can achieve the ¥30 billion off-balance-sheet target is likely to become a key focal point going forward.
Future Outlook
Digital Garage has leveraged its technology base cultivated in the payments space to accelerate investments in fintech companies. However, against a backdrop of unlisted equity valuation reviews amid rising interest rates and a sluggish IPO market, risk management of investment assets had surfaced as a management challenge.
If the partnership with Ion Pacific becomes fully operational, Digital Garage’s financial structure is expected to become more agile, with enhanced resilience to changes in the market environment. The co-development of an AI-powered investment analysis platform could also, over the longer term, contribute to improved precision in venture investing.
Details from the discussions between the two companies, including actual fund establishment and asset transfer specifics, are expected to emerge from the latter half of 2026 onward.
