In a jaw-dropping Tokyo debut, shares of Kokusai Electric soared by an astounding 29%. This surge came after the private equity powerhouse, KKR, made headlines by unloading shares worth a staggering $724 million in what became Japan’s most substantial initial public offering (IPO) in half a decade.
The market opened with Kokusai Electric’s shares at 2,116 yen, and this astonishing ascent reached an all-time high at 2,371 yen. The remarkable turn of events resulted in a remarkable valuation of the company at a whopping 546.3 billion yen, equivalent to $3.65 billion. The key driving force behind this phenomenal IPO? Investors eagerly snatched up shares, demonstrating their enthusiasm for a rare opportunity to invest in a prominent chip equipment manufacturer.
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Kokusai Electric decided to set its share price at 1,840 yen, marking the most significant listing on the Tokyo stock market since the monumental debut of SoftBank Corp in 2018. This move provided a partial exit strategy for KKR, who had successfully reduced its stake in Kokusai Electric from 73.2% to 47.7% without invoking an overallotment.
Tomoichiro Kubota, an esteemed analyst at Matsui Securities, commented, “The market for chip-related stocks outside of AI is weak, so some were wondering what would happen. In the end, the company experienced an impressive start.”
Despite the setbacks experienced by chip tool manufacturers due to the slump in demand for electronics like smartphones and PCs, the silver lining lies in the expected market rebound, coupled with the tool maker’s potential to expand into other segments, as pointed out by Kazuyoshi Saito, an analyst at Iwai Cosmo Securities.
KKR’s involvement traces back to its purchase of Hitachi’s electronic equipment unit in 2017, in a deal valuing the business at an astonishing 257 billion yen, equivalent to $1.72 billion, as part of the conglomerate’s strategy to streamline operations. Subsequently, KKR spun off Kokusai, a company specializing in manufacturing machines for depositing thin films on silicon wafers, in the following year.
KKR’s initial plan to sell Kokusai to competitor Applied Materials in 2019, in a deal worth $3.5 billion, was thwarted by the failure to secure regulatory approval in China. Nevertheless, Applied Materials has quietly amassed a 15% shareholding in Kokusai Electric over the past three years, adding yet another twist to the intriguing story.
The Tokyo equity market has witnessed a remarkable surge, with Japan benefiting from lower interest rates than many other countries. Supported by the endorsement of billionaire Warren Buffett and investors shifting their focus away from China, it’s clear that Kokusai Electric’s stunning debut is just one part of a larger market narrative that continues to captivate the world.
