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Line targets $3B IPO in Tokyo and New York

Line is aiming to raise about $3bn in a dual Tokyo-New York listing, as the Japanese messaging app looks to arm itself with cash to challenge WhatsApp and WeChat.

The initial public offering set for July will come after two abandoned attempts, said people involved in the plans. During that period, the market for technology IPOs in the US has waned while the Abenomics-driven share rise in Japan has fizzed out.

Line was launched in 2011 after the March 11 earthquake and tsunami, when telephone services in Japan were disrupted. Since then, the company owned by Naver, South Korea's biggest internet portal operator, has built on its dominance in its home market to pursue growth in other parts of Asia.

Takeshi Idezawa, Chief Operating Officer of Line Corp.
Junko Kimura-Matsumoto | Bloomberg | Getty Images
Takeshi Idezawa, Chief Operating Officer of Line Corp.

In addition to instant messaging and free calls, Line's 215m monthly active users can also make payments, order pizzas, play games and search for jobs.

But the company has long struggled to make headway against bigger rivals such as Facebook-owned WhatsApp in the US and Europe. In recent years it has quietly put aside its goal to become the world's number one internet company with Takeshi Idezawa, chief executive, saying Line will focus on Asia.

Two-thirds of Line's active users come from Japan, Taiwan, Thailand and Indonesia, where the popularity of cutesy emoticons or digital stickers, which also feature Line's own characters, and mobile games has driven growth.

The IPO also comes amid market concerns that Line's rapid growth may be slowing.

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The company added only 3m in total monthly active users during the latest quarter, although that was a result of adding 7.7m in the four key Asian markets and losing users in others where it trimmed marketing costs.

Line's user base is also small compared to rivals such as WeChat in China, which has 650m monthly active users, and Facebook's WhatsApp with more than 1bn monthly users.

Despite its setbacks outside of Asia, however, analysts say that Line's targeted moneymaking approach has been effective. Revenue rose 40 per cent to Y120.7bn ($1.1bn) from 2014 to 2015, with advertising comprising nearly one-third of its sales.

The money raised from the IPO is expected to be used to step up marketing in its core markets and to invest in artificial intelligence and other technologies, said one of the people involved.

Broader investor appetite for IPOs at home and in the US is far from robust as Line prepares for its roadshow, however. The Nikkei Stock Average has fallen 13 per cent this year as momentum behind the government's growth programme has waned.

"Line has enough brand recognition to attract retail investors in Japan, but market conditions are not necessarily ideal," said Naoki Fujiwara, a fund manager at Shinkin Asset Management.

Japanese companies raised $1.5bn via 44 IPOs and follow-on offerings this year, down 75 per cent from the same period a year ago and recording the lowest volume since 2009, according to Dealogic.

The outlook for technology deals in the US is uncertain with SecureWorks, the cyber security division of Dell, raising less than expected in April despite being the first tech IPO of 2016.

Line has hired Nomura, Morgan Stanley, Goldman Sachs, JPMorgan to advise on its IPO.

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