Rakuten Bank Shares Pop in Tokyo Debut after Downsizing $625 Mln IPO

Rakuten Bank President Hiroyuki Nagai and the company executives hold a placard showing the company logo during a ceremony to mark the company’s debut on the Tokyo Stock Exchange in Tokyo, Japan April 21, 2023.

TOKYO, April 21 (Reuters) – Japan’s Rakuten Bank Ltd 5838.T saw its share price surge as much as 40% in its market debut on Friday, reflecting robust demand for the country’s biggest online lender even after it downsized its $625 million initial public offering (IPO).

The stock ended the trading day at 1,930 yen on the Tokyo Stock Exchange versus an IPO price of 1,400 yen.

It spent the first hour of its debut untraded due to a flood of buy orders before rising as high as 1,965 yen, exceeding the highest proposed IPO price before the deal was scaled back.

Rakuten Bank’s IPO was still Japan’s biggest in over four years, albeit muted by both caution about a banking sector reeling from U.S. bank failures and concern about its exposure to money-losing e-commerce parent Rakuten Group Inc 4755.T.

The share sale gives a much-needed cash boost for parent Rakuten which has seen four years of loss from the costly build-out and subsequent struggle of its mobile phone network.

Rakuten Bank Chief Executive Hiroyuki Nagai told a news conference the lender has no need to sell any more new shares, at least until March 2027 when its mid-term business plan ends.

It also has no plan to pay dividends in the short term though will review the policy in a few years’ time, Nagai said.

The IPO price was “cheap” considering the bank’s return on equity, said analyst Travis Lundy on the Smartkarma platform.

“It still has possibilities for more growth going forward,” though growth rates in deposits, assets and customers may not be as fast as in the past few years, Lundy said.

Friday’s closing price left the lender valued at around 328 billion yen ($2.45 billion).

Rakuten Bank sold 53.95 million existing shares to domestic and overseas investors, as well as 5.55 million new shares. It initially priced them as much as 1,960 yen each.

At the lower price, international demand was so strong that bankers ultimately increased the portion of the share sale available to investors abroad, filings showed.

The overseas portion was still more than 15 times oversubscribed, lead manager Daiwa Securities said.