Rakuten Bank shares surged 40% on the company’s debut on Friday, marking the largest initial public offering in Tokyo since the listing of SoftBank’s mobile division in 2018.
An internet bank with the largest number of customers in Japan was spun off. RakutenAmerica’s largest e-commerce company has raised $625 million in its IPO after slashing its valuation before going public.
Bankers running an IPO at Daiwa Securities faced a range of challenges from investors. Investors questioned valuations and ultimately forced Rakuten to scale back its stake sale ambitions, people with direct knowledge of the situation said.
Founded in 2000, Rakuten Bank has established itself as a pioneer in online banking. JapanThe banking business has been profitable for the past five years, but investors have expressed concern that Rakuten Group’s business will take a hit as a result of widening losses in its mobile division.
The shares were sold at 1,400 yen ($10) per share in the IPO. This is well below the upper end of the provisional range of ¥1,960. On Friday, newly-listed Rakuten Bank shares briefly topped its target, hitting a high of ¥1,965, while Rakuten Group fell more than 2% of his.
“I’m not at all surprised that Rakuten Bank stock has done this,” said Travis Lundy, an independent analyst published by SmartKarma. “We did his IPO at a discount to major Japanese banks. With high expected growth and high return on equity, it will always be an in-demand asset.”
At the same time as the IPO of Rakuten Bank A resurgence of foreign investor interest In Japan, where many stocks are undervalued, activists have recently been successful with buyback calls and other shareholder-friendly actions.
Rakuten Group Led by Flashy Japanese Tech Entrepreneur Hiroshi Mikitanilaunched its mobile network early in the 2020 pandemic and has lost a lot of money since then. In 2017, Rakuten was criticized by investors for signing a sponsorship deal with Barcelona FC for four seasons of jerseys for €55 million a year.
Rakuten’s mobile network business quickly faced government-initiated price cuts and was only able to capture around 3% market share. In February, the Rakuten Group announced a record annual loss of 372.9 billion yen, marking its fourth consecutive year of losses. The banking sector recorded an annual profit of 20 billion yen last year.
Several fund managers who considered investing in Rakuten Bank’s IPO said they ultimately decided against it because they thought the relationship between Rakuten’s parent company and the bank was “troublesome.”
One fund manager said the relationship is fraught with potential conflicts of interest related to transfer pricing for services between the parent and subsidiary.
A broker at a Japanese securities company not involved in the IPO said it was not surprising that the promise of listing Rakuten Bank had not boosted Rakuten Group’s share price.
“Rakuten is a unique Japanese company tapping into the growing e-commerce market, so there are many good reasons to buy Rakuten. That’s what has kept the stock in check,” the broker said, referring to various business decisions, including Barcelona’s sponsorship, that have unnerved investors.
As a prominent CEO, Mr. Mikitani has made headlines in Japan for his non-work life.
Last August, a five-second video was posted on social media that appeared to show him pouring Dom Pérignon champagne into the mouths of party-goers, surrounded by young women in a nightclub. The clip went viral and caused a scandal.
