SINGAPORE – Kioxia\’s shares surged 14% on their market debut on Wednesday, giving the Bain-backed chipmaker a valuation of over 890 billion yen ($5.80 billion). This strong performance underscores the high investor demand for what is now the third-largest IPO in Japan this year.
Kioxia, a major memory chip manufacturer, raised 120 billion yen by pricing its IPO at 1,455 yen per share, within the middle of its indicated range. The stock opened at 1,440 yen, slightly below the IPO price, before rebounding to 1,660 yen by 0510 GMT. Formerly known as Toshiba Memory, Kioxia was acquired by a Bain-led consortium for 2 trillion yen in 2018 after Toshiba, facing a crisis due to its nuclear business, put the division up for sale following a lengthy and contentious battle.
\”The market seems to have reacted positively to the valuation discount,\” said Jon Withaar, a fund manager at Pictet Asset Management. \”There doesn\’t seem to be any rush to sell. Today\’s performance is encouraging for future private equity exits in Japan, assuming valuations remain reasonable.\”
Kioxia\’s debut adds to a strong year for IPOs in Japan, which saw large listings from companies like Tokyo Metro and Carlyle Group-backed testing tool maker Rigaku. So far in 2024, IPOs in Japan have raised over $6 billion, marking the country\’s best year since 2021, although the total number of IPOs is at a decade-low.
The journey to this IPO has been a long one for Kioxia, whose name blends the Japanese word kioku (\”memory\”) and the Greek word axia (\”value\”). The Bain consortium\’s acquisition of Kioxia in 2018 was a landmark event for private equity in Japan. However, uncertainty persisted after the sale, with Bain delaying IPO plans two years later due to global chip market volatility, influenced by tensions between China and the U.S. An attempt to merge Kioxia with partner Western Digital, which had initially opposed the sale, stalled because of concerns from Kioxia\’s investor, SK Hynix.
Bain Capital initially scrapped the IPO plans in October, as investors pushed the firm to cut its target valuation by nearly half. Following the IPO, Bain’s stake in Kioxia will decrease to 50.7%, down from 56.2%. Bain chose to sell only a small portion of its holdings due to the chipmaker\’s market value.
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While the IPO opens up fundraising opportunities in the capital-intensive semiconductor industry, it also brings increased scrutiny of Kioxia\’s financials. In the quarter ending September 30, the company reported a rise in net income to 106 billion yen, up from 69.8 billion yen in the April-June period, driven by a better supply-demand balance.
Despite this, some analysts express caution about Kioxia\’s prospects in the highly competitive memory chip market. \”The proposed valuation is 4-5 times price/sales, which may reflect some scarcity value in the Japanese semiconductor sector, but could be difficult to justify otherwise,\” said Richard Kaye, a portfolio manager at Comgest in Tokyo. \”I\’m not particularly enthusiastic about Kioxia.\”
($1 = 153.4100 yen)
