NHN’s Line Corp., one of Asia’s fastest-growing makers of messaging applications, is considering listing its shares in Tokyo as early as this autumn and could be valued at over $9.8 billion

Line Mulls IPO as Soon as Autumn

Initial Public Offering Could Be Valued at Over $9.8 Billion

KANA INAGAKI

Updated June 3, 2014 12:03 p.m. ET

TOKYO—Line Corp., one of Asia’s fastest-growing makers of messaging applications, is considering listing its shares in Tokyo as early as this autumn, a person familiar with the company’s plans said, in a move that would help fund its overseas ambitions.

Rapidly gaining popularity with its emoticons combined with on-the-go messaging, the Line smartphone app has more than 400 million users world-wide and is seen as a competitor to WhatsApp, the U.S. company Facebook Inc. FB -0.33% is buying for $19 billion, and China’s WeChatTCEHY +1.48%

As the Japanese company has expanded beyond Asia to Latin America and more recently to Europe and the U.S., market players have been watching Line to see whether it would be sold to a bigger player or go public to raise money. Messaging apps are increasingly costly acquisition targets for Internet giants, highlighted by WhatsApp’s purchase price, but they can be a lucrative business to add users as more consumers use smartphones to communicate.

While it is unclear how much the company is planning to raise through an initial public offering, Line could be valued at more than ¥1 trillion ($9.8 billion), the person said. Company spokeswoman Hazuki Yamada said the company is “considering various options and nothing has been decided.”

Line was created in Japan in 2011 by a unit of South Korean Internet firm Naver Corp. Its services have branched out to games, e-commerce, digital marketing and Internet calling, and the app can also be used to share photos and video. “Compared with companies like Facebook and WhatsApp, Line is not just about communication,” Line Chief Executive Akira Morikawa said in April.

Line says it has more than 420 million registered users—more than 85% of them outside Japan—who have downloaded and activated the app, but analysts say the number of active users is substantiallylower and trails WhatsApp with 500 million.

Line’s strength has been its ability to generate revenue, including by selling items in mobile games and selling digital stickers that cost around $1 for a pack of 40. Last year, Line generated sales of $5.1 billion, compared with an estimated $20 million for WhatsApp. In the first quarter, Line’s revenue increased 14% from a year earlier.

“It is essential that we continue to seek new challenges, redoubling our efforts in countries and regions where we are already established as well as breaking ground into new ones,” Mr. Morikawa said after releasing quarterly results in May.

Some analysts have questioned whether Line would be able to replicate the success it has had in Asia in other big markets such as the U.S., where users often favor functionality and don’t necessarily share the enthusiasm for cuddly character stickers. Mr. Morikawa has admitted that the U.S. would be a difficult market, but he has also pointed to Line’s efforts to adapt to local tastes. One person familiar with the company’s management has said those localization costs are piling up, which may be another reason the company is planning to go public.

Japanese companies have been turning to the stock market to raise money, with share prices steadily rising following a weak start to the year. Companies have raised $5.8 billion in IPOs this year in Japan, compared with $2.3 billion in January through May of 2013 and just $484 million for that period in 2012, according to Dealogic.

Still, the timing of Line’s listing could be delayed if too many IPOs are lined up during the second half of the year, the person said. Despite the increase in share offerings, some big IPOs have flopped this year, including the $3.1 billion listing ofJapan Display Inc. 6740.TO +0.49% in March.

Bloomberg News reported earlier that Line was working with Nomura Holdings Inc. and Morgan Stanley to prepare for an IPO as soon as November.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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