Japan’s SoftBank Group Corp. marked another first in Japan on Friday, shunning the usual practice of providing an indicative range, as it sets an indicative price of ¥1,500 ($13.22) per share for the initial public offering (IPO) of its domestic telecommunications unit.
The given figure means the deal is potentially worth ¥2.4 trillion ($21.16 billion), making it one of the largest IPOs ever in Japan.
The price was unchanged from the tentative one that SoftBank Corp., the company’s mobile phone business, disclosed when it started the IPO earlier this month.
Analyst Chris Lane said the price appeared to be consistent with what they were hearing about relatively strong retail demand, and that they were not surprised about that demand as the retail investor is really looking at the yield.
At ¥1,500 a share, the telecommunications’ market value will reach about ¥7.2 trillion, making it Japan’s eight-largest listed firm, immediately ahead of Uniqlo’s clothing chain operator Fast Retailing Co. Ltd.
Shares of SoftBank gained 0.08 percent to ¥9,526.0 on Friday.
Confidence in Demand
Investor saw SoftBank’s decision as a sign that founder and chief executive Masayoshi Son was confident about the biggest IPOs in history will be comfortably well subscribed by retail investors at that price.
If effectively people are positive that the offering will be oversubscribed at that price, then there is no need to set a price range, according to Lane.
The IPO is set for December 19 on the Tokyo Stock Exchange and its final price will be decided on December 10.
If SoftBank’s shares received strong demand, the overallotment could still raise its offering’s total further by ¥240.6 billion ($2.12 billion), moving it closer to the $25 billion worth of shares sold by Chinese e-commerce firm Alibaba Group Holding Ltd. in 2014 in the largest-ever IPO.
The IPO is intended to help the Japanese conglomerate pay down debt and provide funds that can be redeployed into more tech investments that Son believes will fuel future tech innovations.
Son has shifted his focus on tech investments in recent years, following successful bets on companies like Alibaba, and internet services group Yahoo! Inc. SoftBank’s $100 billion Vision Fund is the biggest tech investment fund ever, and Son intends to set up similar sized funds every two or three years.
Brokerages initially expressed concern over whether the IPO would generate enough demand seeing the size of the sale but have since reported strong interest.
An underpriced IPO would raise lees money for SoftBank, and could result to a jump in shares on its trading debut on December 19. On the other hand, an overpriced IPO risks leaving unsold shares on the table. There is still room for a price adjustment, according to SoftBank.
To stir up interest, brokerages have exerted efforts in unprecedented marketing campaign, including what are considered to be Japan’s first television advertisements for a private company’s IPO.
A senior official at one of major brokerage stated that from what they are getting from their customers, they have demand greater than the number of shares they are allocated to share. Others have said the initial estimate was already high considering the telecommunications’ funds compared with its peers.
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