Japanese messaging-app company Line Corp. raises its initial public offering price on Monday to between $28.50 and $32.50, signaling what would be the largest technology IPO so far this year.
Alexander Martin of The Wall Street Journal has the news:
In a news release, Line said the decision to raise its price range took into consideration demand trends and stock market conditions, indicating that investors are keen on the IPO despite recent market turmoil following Britain’s vote to exit the European Union.
Line is offering 13 million new shares in Japan and 22 million shares in New York. A further 5.25 million shares could be sold through a “green-shoe” option, which allows for the issuance of additional shares if there is exceptional demand.
At the top end of the price range, the offering could be valued at up to ¥133 billion, if all additional shares are sold. The planned listing will likely be one of the biggest in Japan since Japan Post Holdings Co. and two financial units fetched around $12 billion in November.
Line delayed setting its IPO price range last week as global markets reeled from the impact of the U.K.’s vote to leave the European Union. The company, however, has said there is no change in its IPO plans, and that the final price will be set on July 11.
Pavel Alpeyev and Takashi Amano of Bloomberg report that the company held off for two years in hopes of getting a better price, which didn’t happen:
“The stock will do well on the back of retail investor demand,” said Amir Anvarzadeh, manager of Japanese equity sales at BGC Partners Inc. “I can see the price going to 4,000 yen post listing, but the chances of significant growth overseas are very remote.”
The Japanese stock market has pared the losses in the wake of the U.K.’s vote. The Nikkei 225 Stock Average climbed 4.9 percent last week, after closing 7.9 percent lower on June 24. Line will set the final price on July 11.
Line originally filed to go public two years ago, but held off in hopes of getting a stronger reception from investors. Instead, the delay may have cost the messaging service $3 billion in valuation as Facebook Inc. began encroaching on its turf and the market for technology company IPOs cooled. Line will be valued at about 693 billion yen if it prices its IPO at the very top of its range, compared with a target of about 1 trillion yen in 2014.
Line is now gearing up for a battle with far larger rivals Facebook and Tencent Holdings Ltd. as it looks to expand its 218 million user base beyond its strongest markets of Japan, Taiwan and Thailand. It plans to use the proceeds to spearhead an expansion across Asia and, eventually, the U.S.
Siddhi Bajaj of TheStreet.com notes that the offering has some risks:
However, a closer look at Line’s financials and plans suggest that the company has problems.
Two years ago, Line, currently owned by South Korea’s online search giant Naver Corporation, would have been valued at $10-$20 billion, according to some observers. However, the company decided to hold off the IPO to tweak its business plan, address weak financial controls and ramp up its manpower.
Chief executive Takeshi Idezawa who joined last year, spearheaded significant changes. Line now boasts 750 additional workers including designers and engineers. Still, Line is staring at stalling sales and users growth, among other issues.
Over the past three years, the number of monthly active users tripled. But that slowed significantly last year.
A majority of Line’s revenues come from sales of emojis and electronic stickers, with Brown the bear and Cony the rabbit garnering huge fan following. The service is also popular for games.
Rivals like Facebook Messenger now also offer emoji for free, forcing Line to explore newer revenue streams.
