Line announces price listing amid a poor IPO market

Source: techinasia.com

LINE, popular Japanese messaging app, is slated to come public in New York under the symbol “LN” on July 14 and in Tokyo the following day. Just over 40 IPOs have been priced in the US this year, down over 50% from last year making 2016 the slowest quarter for IPOs in the last 7 years, with most of the volatility caused by uncertainties regarding the Chinese economy, according to Yahoo Finance.

Line plans to offer 35 million shares at a price range of $26.50 to $31.50 per share. This would value the company at approximately $6.5 billion.

At most, the company could raise $1.3 billion, making it the biggest tech listing of this year so far. Initially, Line was planning to delay its price announcement due to the Brexit craze, but decided to price the company as planned. This could be the biggest tech IPO since 2014.

Line announces price listing amid a poor IPO market

Further worries regarding Brexit followed this month and after a quiet first quarter, the IPO market is going through a phase of normalization. Pricings in the market were held back by a public-private valuation disconnect in the tech sector, and poor trading of 2015 IPOs. The Brexit cloud and its effect on interest rates also contributed to the first quarter slump in the market.

In 2014, Line highlighted its potential valuation at $10 billion, much higher than its current $6.5 billion. The company has seen a deceleration in sales growth, which was up 40% to $1.1 billion in 2015, as it has focused on profitability (operating income swung positive in the 1Q16).

“Instead of trying to expand dramatically, they’ve focused on existing markets and reduced marketing spend, becoming profitable at the expense of growing users,” said Kathy Smith, Manager at Renaissance Capital.

Line currently has around 218 million monthly active users, and is the dominant messaging application in Thailand, Taiwan, Japan and Indonesia. Globally, it faces competition from China’s WeChat, which has 760 million monthly active users, and Facebook’s Whatsapp and messenger, which have a total of 2 billion active monthly users combined.

Line’s performance in July may be indicative of the remainder of 2016 IPOs.

A version of this article was published in Yahoo Finance on July 6. Read the full version here.