By Jeff W. Richards
TOKYO (MarketWatch) — Last year, China’s Alibaba Group unleashed a monster of an IPO, the world’s biggest to date. But this year, Japan has a monster of its own that by all accounts could blow past the Alibaba listing to become the most massive offering of stock ever seen.
It is easily the hottest topic around the boardrooms and izakayas (after-work drinking halls) across Tokyo: the highly anticipated initial public offering of Japan Post Holdings, the finance-ministry-held behemoth that combines the national postal service with the country’s biggest savings bank and major insurer. Its financial arm alone had ¥205 trillion ($1.71 trillion) worth of assets under management as of December, roughly one-third the entire annual GDP of Japan.
The offering has been more than a decade in the making, surviving fierce political controversy since the idea of privatization was first introduced. The issue was a sensitive one because not only does Japan Post bring in a massive amount of revenue, but also it’s the nation’s largest employer.
Finally, with the government determined to shore up Japan’s debt-bedraggled finances, the stock appears ready to go to market sometime this autumn, with the ministry having set a goal of ¥4 trillion yen, or about $33 billion, for the divestment proceeds. It has earmarked the funds for rebuilding parts of northeastern Japan destroyed by the 2011 earthquake and tsunami.
Such an amount would dwarf Alibaba’s /zigman2/quotes/201948298/composite BABA -1.31% $25 billion haul — to date the largest in history. Still, much of the details have yet to surface, and according to the Nikkei Asian Review, the event may come as a trio of listings: Japan Post Holdings, along with separate tickers for its subsidiaries Japan Post Bank and Japan Post Insurance. Likewise, some reckonings see the issue as pulling in a somewhat more modest $10 billion-$20 billion.
In discussing the big Japan Post sale, those with longer memories note similarities with the situation a quarter-century ago, when the government privatized its fixed-line carrier, Nippon Telegraph & Telephone /zigman2/quotes/200718273/delayed JP:9432 -0.02% . Unusually for Japan, its listing was a big event not just for institutions, but for retail investors as well.
“In 1990, NTT went public, and I think it was the same situation” as now, says Masaki Kai, the founder and chief executive of Tokyo investor-relations firm FinanTec.
“This is a positive thing,” says Kai, who also runs the bilingual website TokyoIPO.com. “When Japan Post goes public, people who are not interested in equity markets will become interested in them.”
And Japan Post isn’t the only potential stock-market debutante with mass appeal. Among other stars likely to list in Tokyo this year is Line Corp., the maker of Japan’s most widely used free-call and messaging app, often compared with Facebook Inc.’s /zigman2/quotes/205064656/composite FB -1.15% WhatsApp and Tencent Holdings Ltd.’s /zigman2/quotes/204605823/delayed HK:700 -2.93% /zigman2/quotes/207908563/composite TCEHY -0.15% WeChat.
Line — currently a wholly owned subsidiary of South Korean Internet company Naver Corp. /zigman2/quotes/208724142/delayed KR:035420 +4.00% NHNCF 0.00% — has proved adept at monetizing its content. For example, it does brisk sales in its virtual “stickers,” which users can send in lieu of emoji, to the tune of $323 million in 2013, according to The Wall Street Journal. In fact, the stickers have become so popular that the company even opened up a brick-and-mortar “Line Friends Store” in central Tokyo where users can purchase physical versions of the official seals they send digitally. How meta.
Line had planned to list last year but later decided the timing wasn’t right. According to the Nikkei, one of the possible issues delaying an IPO was internal debate over whether to list simultaneously in the U.S. and Japan.
As with Japan Post, the familiarity of Line could spark considerable retail interest. This is not usually the case, notes NHK World Newsline reporter Mayu Yoshida. While “buzz” is a regular feature of IPOs in the U.S., at least if they are of a significant size, Japan greets most new offerings with a yawn.
But this year, the potential market debutantes “are definitely more eye-catching than in previous years,” Yoshida says, citing talks that theme park Universal Studios Japan (USJ) might also go to market soon.
“It’s very popular in Japan,” FinanTec’s Kai says of privately held USJ, which operates under license from Comcast Corp.’s /zigman2/quotes/209472081/composite CMCSA +0.36% NBCUniversal. “They had gone public in 2006 and then went private in 2009. Now, they are relisting their brand. … Harry Potter is still popular, so maybe they will get a good valuation.”
Kai also tips a likely IPO from the capital’s light-rail operator Tokyo Metro Co., which first applied last year for a listing — a move that would allow them to secure funding for major upgrades and infrastructure improvements.
“It’s a good story for the 2020 Tokyo Olympics,” says Kai. “I think they will probably announce within this year.”