With the global sell-off that hammered technology stocks now in the rear-view mirror, it’s time to look at a technology stock devoid of the Brexit drama. By that I mean the coming initial public offering (IPO) of Line Corp., the most popular messaging app in Japan. With a public offering slated for mid-July, the Line IPO could be one of the biggest listings among technology stocks in 2016.
Yes, the company’s name—Line Corp.—is boring, but it could offer those interested in tech stocks an opportunity to invest in a company that has little to do (right now) with the North American or European markets—and that’s not a bad idea.
Line Corp. is owned by South Korean Internet company Naver Corporation. The “Line” app is Japan’s answer to Facebook’s smartphone battery–sucking messaging app, “WhatsApp.” Through Line, users get free voice calls and messaging. The company makes money from the sale of digital stamps, games, and advertising. In 2014, it expanded its offerings to include streaming music and taxi hailing.
The company boasts approximately 218 million monthly active users (MAUs), making it the most popular mobile messaging app in the country. Line is also popular in Thailand, Taiwan, and Indonesia and is experiencing solid growth in the Middle East. (Source: “LINE Corporation Announces 2016 Q1 Earnings,” Line Corp., April 28, 2016.)
Is Line Corp. Really Worth $5.0 Billion?
Line Corp. is planning a dual IPO next month in Tokyo (July 15) and New York (July 14) that is expected to raise more than $900 million and value the company at more than $5.0 billion.
The set price range for the IPO in Tokyo and New York is ¥2,700–¥3,200 (US$26.50–$31.50) a share. The company is offering 13 million shares in Japan and an additional 22 million shares in New York.
Why list in the U.S.? With 130 million people, Japan has a huge market, but it certainly can’t hurt the company to increase its exposure in the world’s biggest economy, especially when it’s promoting an app that is a small player in a seemingly saturated market.
WhatsApp, which is owned by Facebook, has more than one billion users. “WeChat,” a popular messaging app in China, has approximately 775 million users.
But wait, why is Line not popular in China, too? Because Line has been blocked in China since 2014. Something tells me the effects of the 2008 Summer Olympics, which were meant to show how democratic and open China has become, didn’t stick. I’m pretty sure things will change after China hosts the unwanted 2022 Winter Olympics though…
Anyway, Line’s revenue growth from its core business has been enviable, from around ¥34.0 billion (US$317.5 million) in 2013 to ¥110 billion (US$1.07 billion) in 2015. At the end of 2013, Line had just 13 million MAUs. As noted above, today, it has more than 218 million MAUs. (Source: “WhatsApp Rival Line to List in Tokyo, New York,” The Wall Street Journal, June 10, 2016.)
With that kind of user growth, there is more than enough room for the company to establish new revenue streams and (eventually) turn a profit. Fortunately, investors aren’t too concerned about profits when it comes to Internet stocks.
Should investors clamor to get in on the Line Corp. IPO? Since Facebook purchased WhatsApp for $19.0 billion in 2014, no new messenger app has held an IPO. Has Line Corp. missed its chance or is this a new window? In the quiet days of summer, it might be a good idea to take a wait-and-see approach with the Line IPO.
Worst-case scenario: Line Corp. could be a great acquisition target.