Line IPO: This Is Why Line Corp Could Be the Top IPO of 2016

Line IPOLine IPO Could Raise Over $1.3 billion

Japan’s Line Corp, which owns and runs the “Line” messaging app, has priced its initial public offering (IPO) price at ¥3,300 (US$32.10) per share, featuring a dual listing in Tokyo and New York. At that price, the Line IPO could raise the equivalent of US$1.3 billion in what will be Japan’s most important IPO in years. Certainly, the Line IPO could be one of the most important offerings in the markets anywhere this year.

On July 11, Line Corp valued the company at some $6.0 billion. Line will offer 35 million shares, of which 13 million in Japan and the remainder in New York. The Line IPO is important beyond the fortunes of this Japanese company itself. Indeed, many analysts expect it to serve as a “canary in the coalmine” to gauge the appeal of tech sector IPOs. (Source: “Popular messaging app operator Line is set to launch the year’s biggest tech market debut,” CNN, July 11, 2016.)

In the past year, such hyped-up IPO debuts as Match Group Inc (NASDAQ:MTCH), which operates, failed to match (no pun intended) expectations. Indeed, many tech companies are considering raising funds privately rather than risk their fortunes in the public markets. (Source: “Hunger for tech startups helps Japan’s Line price IPO at top of range,” The Globe and Mail, July 11, 2016.)

Line raised its indicative range last week due to strong demand from foreign investors looking for some Asian assets. Many such investors are trying to leave some of the risks of the North American and European markets behind in the wake of the U.K. Brexit referendum.

So far, it seems the Line IPO will be the largest in Japan since the partial privatization of Japan Post in 2015. There is reason for such optimism, though, as the stock has also attracted interest from Japanese retail investors.

You may not have heard of Line, but the company has acquired a huge reputation in Japan, having gained prominence at a critical moment. Line came into the limelight after the earthquake and tsunami of March 2011 that left thousands of victims and cut communications in Japan. Line has since become the most important platform for mobile messaging in the country. It has earned strong customer loyalty, which will likely translate to strong Line investor loyalty. The Line IPO is certainly one to watch.

As for the billion-dollar question: how does Line stock make money?

The company derives most of its revenue from selling games and emojis (emoticons). So far, it has not been diligent about expanding beyond Japan and Southeast Asia, but interest exists on the American side of the Pacific Ocean, according to Gavin Parry, founder of Parry International Trading Hong Kong. (Source: Ibid.)