- Kokusai Electric was spun off from Hitachi Kokusai Electric and acquired by American private equity firm KKR for $2.2 billion in 2017.
- The IPO sold around 58.8 million shares, raising a total of 108 billion yen, and Kokusai estimates the IPO price at around 424 billion yen.
In this photo illustration, the Kokusai Electric logo is seen on a smartphone screen. (Photo illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
Sopa pictures | Light rocket | Getty Images
Shares of Japanese semiconductor equipment maker Kokusai Electric enjoyed a strong debut on the Tokyo Stock Exchange on Wednesday.
The stock hit a high of 2,431 yen ($16.22) per share on the trading day – a rise of up to 32% above the IPO price of 1,840 yen.
The IPO sold around 58.8 million shares, raising a total of 108 billion yen, and Kokusai estimates the IPO price at around 424 billion yen.
According to the Japan Times, this is Japan’s largest listing since SoftBank’s 2.4 trillion yen listing in December 2018.
Kokusai Electric is a spin-off of Hitachi Kokusai Electric, a subsidiary of the Japanese multinational electronics company Hitachi. It was acquired by American private equity firm KKR in 2018 for $2.2 billion.
However, Mio Kato, founder of research firm Lightstream Research, told CNBC’s “Street Signs Asia” that he was “surprised” by the price movement, adding that a “10 percent move or something like that would have been reasonable.”
Kato’s overall assessment of the stock is “somewhat mixed,” he said, noting that while it is “extremely cheap” based on historical numbers.
He said Kokusai Electric may not be as competitive as its rivals Tokyo Electron or Lasertec, which dominate niche markets in the semiconductor production process.
Overall, KKR appears to have done quite well in the deal. It is therefore questionable whether they want to hold this position for very long.
Mio Kato
Lightstream Research
Kokusai’s businesses are primarily focused on memory chips, which Kato said are “under pressure.”
He said applications such as artificial intelligence use logic chips instead of memory chips used in smartphones.
Kato believes that there are not many new innovations in the smartphone space. If smartphone volumes stagnate, it will put pressure on overall storage volume growth, he said.
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“We simply feel that the company’s overall presence is not ideal. It’s not particularly bad, and as long as technology and semiconductors do well the company should benefit, but we think it may not benefit quite as much as its peers.”
In the medium term, despite the initial exuberance, there could be an overhang in the share price, Kato said, emphasizing that KKR still has about 110 million shares after the IPO that could be sold after the 180-day lock-up period.
“Overall, KKR appears to have done quite well in the deal. Therefore, it is questionable whether they want to maintain this position for a very long time,” he said.
“If this is not the case, this could potentially lead to downward pressure on the stock as one begins to forecast six to 12 months ahead.”