Kokusai’s IPO appears promising and may become a reference point for new listings in the future.
Chip equipment maker Kokusai Electric has raised $724.4 million after pricing its shares at 1,840 yen each in its IPO. Kokusai Electric spun out of Hitachi Kokusai Electric Inc. which KKR bought in 2017. The current share offerings put the company’s valuation at 423.9 billion yen ($2.8 billion) – a 60% increase from the price KKR paid to acquire the group in 2017.
Kokusai set its shares at the top end of its marketed range. Even if the shares sold at the bottom of the range, the Initial Public Offering (IPO) would still be larger than SoftBank Corp’s listing in 2018. Consequently, Kokusai’s share offering makes it Japan’s largest in five years.
According to Reuters, share allotment to foreign investors was oversubscribed by more than ten times. However, the overallotment option to domestic investors was not exercised. If it is, the IPO would raise about $833 million.
Kokusai’s largest customers are institutional investors, with Samsung Electronics, TSMC, and Micron Technology accounting for over 40 percent of Kokusai’s revenue.
Kokusai Electric IPO Coincides with Reduced Chip Demand
Meanwhile, Kokusai’s IPO coincides with rising concerns about the strength of demand in the chip industry. These concerns emerged after Taiwan Semiconductor Manufacturing Company (TSMC) reportedly asked its suppliers to delay equipment delivery because of reduced global demand.
Despite this, investor sentiments remain strong. Similar companies have witnessed a growth in their stock due to the surge in artificial intelligence. For example, the shares of Tokyo Electron have risen more than 60% year-to-date. Again, Kokusai’s stock is competitively priced against global competitors like Applied Materials.
Furthermore, the overall Japanese equity market is at its highest in three decades, bringing considerable benefits to new listings. These new listings in 2023 have outperformed all others in the region, and Kokusai’s listing will likely be the same.
Whatever the case, Kokusai Electric will benefit from the new Japanese economic security law – a government attempt to improve the country’s chip sector. The law will enable the company to enjoy tax subsidies worth up to $2.8bn.
Combined, Kokusai’s IPO appears promising and may become a reference point for new listings in the future. With the final share price decided, the stock will now be listed on Tokyobourse’s Prime Market by October 25.
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