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Friday, 17 November 2017

Asia-Pacific Equity Issue: ​Line’s US$1.3bn IPO

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Dual dazzler

The US$1.3bn dual listing of messenger app Line in Tokyo and New York was one of those rare IPOs that not only set the financial world alight, but that also caught the imagination of the public at large.

Building on the popularity of Line’s dancing bear and laughing rabbit stickers in Japan and beyond, bankers put together a major global equity raising to better enable the company to compete against rivals such as WhatsApp and Tencent’s WeChat.

The simultaneous dual listing was a decision that paid off, allowing US technology funds in as anchor investors while also opening the door to Japanese investors who drove the stock’s initial performance.

“You don’t see many dual listings these days,” said Mitsuhiko Sumino, Nomura’s head of equity capital markets. “All those Japanese dual-listed companies that do exist, they started in Japan and decided to list in the US later.”

The turbulent economic conditions around the UK’s vote to exit the European Union also made the deal challenging. Setting the price range was slightly delayed due to the unexpected outcome of the referendum, but nonetheless Line was confident enough to open books on the float within two days of the vote.

After weathering the Brexit turbulence, the company settled on a price range of ¥2,700–¥3,200 for the Japanese portion of the deal and US$26.50–$31.50 for the US portion. But strong demand gave dealmakers the opportunity to push up the price range slightly – a rare feat in the Japanese market.

“We think the quality of the book was good and the overall volume of demand needed a higher range,” said a source close to the deal at the time. “We had the option to price a little higher.”

The move to increase the range paid off for Line and the deal eventually was priced at ¥3,300 per share with books around 20 times covered globally. The Japanese offering consisted of 37% of the deal and the international offering was 63%.

Line priced the IPO at a 2017 P/E ratio of about 25 times. Comparables Facebook, which owns WhatsApp, and Tencent, known for its QQ and WeChat messaging apps, traded at 2017 forecast earnings of about 26 times at the time.

The success story continued for the company as the Tokyo Stock Exchange shares popped by as much 50% on their debut and the ADS on the New York Stock Exchange jumped a similarly impressive 33%.

The shares were still showing strong gains at ¥4,010 around the middle of November, by which time the market capitalisation of the firm had settled at about US$8.3bn.

Morgan Stanley, Goldman Sachs, JP Morgan and Nomura were joint global coordinators.

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

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