Line IPO Price Delayed by Global Uncertainty
Although tech IPOs (initial public offerings) have been rare in the last 18 months, the upcoming Line IPO was supposed to buck the trend. But then the Brexit happened. As a result, the South Korean-based company has postponed releasing its Line IPO price.
Line Corporation operates Japan’s most popular messaging app, “Line.” Its expansion plans make it a natural threat to Facebook’s “WhatsApp” and “Messenger” services, not to mention China’s “WeChat.”
Many analysts consider messaging apps the next great platform, but Britain’s recent vote to leave the European Union threw a wrench in the global markets. Uncertainty spiked across the board.
Ripple effects stretched all the way to Japan, where the Nikkei Index fell 7.9% on a sudden increase in volatility. The yen to British pound exchange rate surged 18%, which hasn’t happened in 45 years. Simply put, the Brexit results took the market by surprise.
That being said, a slowdown in tech IPOs predates the referendum. More and more startups were choosing to stay private in order to avoid this kind of volatility.
Companies like Uber, Airbnb, and Snapchat have steered clear of the stock exchange because they could get easy money from venture capitalists instead. Their valuations have reached stunning heights but eventually, their shareholders will demand an “exit.”
And “exit” is the industry term for a big payout, achieved by either going public or selling the company to an existing conglomerate. The potential exit is why VCs invest in the first place; they’re placing several bets, hoping one will have a huge payday.
By going public, Line Corporation could finally find the resources it needs to compete on a global scale. Facebook already has the funds to arm its two mega-messaging platforms, and WeChat’s owner, Tencent Holdings Ltd, has seriously deep pockets.
Here are five things you should know about the Line IPO:
Who Owns Line Right Now?
Naver Corporation, a massive Asian conglomerate, currently owns Line.
The company is similar to Google, save for the fact that it operates mostly in Far East countries like South Korea, Thailand, and Taiwan. Its success was originally based off of a web portal that featured a question-and-answer forum and a search engine that sifted through news, blogs, and other web pages to provide useful results.
Naver’s ability to compete with Western giants like Google is impressive. For instance, Naver went head to head with Google in South Korea and it took 75% of the market share to Google’s two percent. (Source: “After beating Google, Korea’s Naver goes global with messaging app Line,” Reuters, July 7, 2016.)
How Much Are They Raising?
The Line IPO should haul in $1.1 billion from the sale of new and existing shares. Nomura Holdings, Inc., JPMorgan Chase & Co., Morgan Stanley, and Goldman Sachs Group Inc are heading up the funding round. It’s scheduled to be the largest tech IPO of 2016, making it a must-watch ticker. (Source: “Line Delays Setting IPO Price Range Amid Brexit Turmoil,” Bloomberg, June 27, 2016.)
What Is Line Exactly?
Line is an instant messaging service similar to WhatsApp, Messenger, and WeChat.
Although you may not have heard of the firm before, you definitely have seen some of its work. Think of all the emoticons and emojis you see everywhere—those were pioneered by Line.
They also have the usual voice and video calling services. As for scale, the service has brought in more than 218 million monthly active users, making it a bona fide heavyweight.
What Is the Line IPO Price?
The original plan was to announce the Line IPO target range on Monday, June 27 and subsequently finalize the price on July 11. The Brexit fiasco had markets plunging on Friday, so the company decided to delay for one more day. There are rumors of a sliding valuation based on market pessimism. The Line IPO price could end up being lower than expected.
Can Americans Invest in the Line IPO?
At present, it looks like two-thirds of the Line IPO will take place in the U.S., presenting a unique opportunity for retail investors to hedge their bets geographically. The ticker will be listed in both New York and Tokyo. Line is also a standalone bet on messaging apps, which some investors might prefer to conglomerates like Facebook Inc. (Source: “Line, the Biggest Tech IPO of the Year,” Fortune, June 26, 2016.)