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LINE values IPO 17% above initial price due to strong demand

Line app

Japan-based messaging app LINE Corp has decided to price its IPO at 3,300 yen ($31.62), which is 17% higher than initial price after it witnessed strong demand from investors, fetching the company more than $1.14 billion, reports Wall Street Journal. The company announced last month that it will go public on the Tokyo Stock Exchange and the New York Stock Exchange (NYSE), to strengthen its position in the Asian market and expand globally, while initially pricing 35 million shares for an indicative price of 2,800 yen ($26.83) each.

LINE said in a statement yesterday that it would sell 35 million shares for a price of 3,300 yen ($31.62) each, with 13 million new shares being listed in Japan and 22 million shares overseas in NYSE. The total offering size is approximately 115.5 billion yen ($1.14 billion), assuming the underwriters do not exercise their option to purchase additional shares, added the statement. The IPO will begin trading in NYSE on July 14, 2016 under the symbol “LN” and will trade in the Tokyo Stock Exchange on July 15, 2016

Overwhelming demand: A Bloomberg report mentions that individual investors had agreed to pay up to 3,800 yen ($36) per share, while traders and other brokerage firms were willing to bid up to 4,200 yen ($62.52). The IPO was oversubscribed at almost 25 times than the original offering, added the report. This is undoubtedly the largest IPO value for any technology company in 2016.

Last month, when the IPO was announced, LINE’s South Korea based parent company Naver which owns a 100% stake, said it would sell as many as 5.25 million existing shares of its subsidiary valuing the IPO at 112.7 billion yen with 40.25 million shares to be sold. Note that in 2014, Line had filed for an IPO at the Tokyo Stock Exchange, valuing it at about $10 billion. But later the company decided against the idea as it had shown a strong growth.

Financials: According to its recent earnings release for the quarter ending 31 March (Q1 FY16), Line reported $275 million in revenue from its core business, a 22% increase from the same quarter in the previous year. Overall the revenue for the quarter stood at $303 million. It said that advertisements accounted for 35% of its sales, while games and other content accounted for a further 35%. The stamp business accounted for 22%.

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Competition

LINE’s competitors includes the Facebook-owned WhatsApp messenger which crossed 1 billion monthly active users  in February, as well as Facebook’s own standalone Messenger app that had crossed 800 million active monthly users in January. Apart from this, China based WeChat owned by Tencnet, which surpassed 700 million MAU during March 2016 is another immediate competitor to LINE. Note that Tencent also owns China’s QQ Messenger that has 550 million users at the same time.

Image Credits: Flickr User Bhupinder Nayyar under CC BY 2.0

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