Kioxia, a major manufacturer of memory chips, raised 120 billion yen after pricing its IPO in the middle of the indicative range at 1,455 yen per share. On Wednesday, it opened at 1,440 yen, below the IPO price before recovering to trade at 1,549 yen by 0152 GMT.
Kioxia, formerly known as Toshiba Memory, was bought for 2 trillion yen in 2018 by a Bain-led consortium from Toshiba after a long and contentious battle. Toshiba put the business up for sale after plunging into crisis due to cost overruns at its nuclear business.
“Market appears to have reacted well to the valuation discount being offered,” said Jon Withaar, who manages an Asia special situations hedge fund at Pictet Asset Management.
“There doesn’t appear to be any urgent selling. Today’s performance bodes well for future private equity exits in Japan providing valuation is reasonable.”
Kioxia’s debut comes in a strong year for IPOs in Japan that saw big-ticket IPOs from Tokyo Metro and Carlyle Group backed testing tool maker Rigaku.
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IPOs in Japan have raised over $6 billion so far in 2024, LSEG data shows, its best year since 2021, although the number of IPOs is at their lowest in a decade. The road to the IPO has been an arduous one for Kioxia, whose name is a combination of the Japanese word kioku meaning “memory” and the Greek word axia meaning “value”.
The deal by the Bain consortium to acquire Kioxia, seen as a prized asset at the time, was a landmark intervention by private equity in Japan.
Uncertainty has continued since the sale, with Bain postponing IPO plans two years later amid uncertainty in the global chip market stemming from Sino-U.S. tensions.
An effort to merge Kioxia with partner Western Digital , which had initially objected to the sale to the consortium, stalled due to reservations from the Japanese company’s investor SK Hynix.
Bain Capital scrapped plans for an IPO of Kioxia in October after investors pushed the buyout firm to almost halve the 1.5 trillion yen valuation it was seeking, Reuters has reported.
Bain’s stake in Kioxia is due to fall with the IPO to 50.7%, including the overallotment, from 56.2% previously. Bain decided to sell only a small portion of its shareholding due to the market value of the chipmaker, a person familiar with the buyout firm’s thinking has said.
While going public would offer Kioxia fundraising options in a capital-intensive industry, it would also increase scrutiny on the company’s financials.
In the quarter ended Sept. 30, the firm said its net income rose to 106 billion yen from 69.8 billion yen in the April-June quarter, benefiting from a improving supply-demand balance.
Some analysts, though, worry about the firm’s prospects in a highly competitive memory chip market that may not benefit strongly from the boom in AI chips.
“The mooted valuation is 4-5 times price/sales which may represent some scarcity value in the Japanese market for semiconductor stocks, but might be hard to justify otherwise,” said Richard Kaye, a Tokyo-based portfolio manager at Comgest.
“I’m not terribly excited about Kioxia.”
($1 = 153.6800 yen)
