Memory-chip maker Kioxia Holdings made a significant splash on its debut at the Tokyo Stock Exchange on December 18, 2023, as its shares surged by 12%. This surge was indicative of the strong investor demand for new shares within Japan, as the company managed to rise well above its initial public offering (IPO) price and valued the firm at approximately ¥877 billion (around $7.72 billion).
Originally set at ¥1,455, Kioxia's shares closed the day at ¥1,627. While this surge is impressive, it remains but a fraction of the US$18 billion (approximately ¥2 trillion) paid by Bain Capital and its consortium to acquire Kioxia back in 2018. This IPO is particularly noteworthy as Kioxia stands as the world's third-largest NAND chip manufacturer and is listing after extended, complex negotiations involving Bain Capital, SK Inc., Western Digital, and the Japanese government.
The company's IPO price was strategically placed at the mid-range of what had been projected before the offering. Historical data from the Japan Exchange Group indicates most IPOs this year have debuted higher than their forecasted upper limits, providing insights on the overall market conditions. “The price moves reflect expectations of its recovery,” commented Seiichiro Iwamoto, a fund manager from Asset Management One. The relatively low IPO price has proven appealing, attracting considerable investor interest.
Data suggests Kioxia's price-to-book ratio is around 1.87 times, which is less than Micron Technology's 2.67 times, according to Bloomberg-compiled figures, indicating some relative affordability among leading competitors. Across Japan, IPO activities have raised roughly ¥938 billion this year, marking the highest total since 2018, but we also see trends indicating significant sales dominated by larger deals. For example, listings for major entities such as Tokyo Metro and Rigaku Holdings have captured attention, yet the total number of offerings has plummeted to its lowest level over the last decade.
Investors are closely monitoring whether Kioxia and other players within the memory chip sector will benefit from the massive multi-trillion-dollar investments being funneled toward global data centers by tech giants like Microsoft and Amazon.com. Although anticipation brews around possible gains, it's important to note the NAND sector has yet to recover fully from its prolonged price slump stemming from decreased global mobile demand post-COVID peaks.
Western Digital, with which Kioxia shares a manufacturing joint venture based in northern Japan, recently noted the continued weakness of NAND pricing through the fourth quarter. Despite this caution, Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors, remarked on the IPO’s initial upward movement and suggested, “Still, the fact the IPO came at the mid-range of its pricing is relatively good, considering the market's poor backdrop.”
Looking forward, Kioxia's debut stands as both a highlight and indicator of investor confidence amid fluctuated market activity, amid notable macroeconomic trends. The fluctuative nature of memory chip pricing leaves questions hanging over Kioxia's capacity for sustained performance following its initial IPO success. With the backdrop of stifled demand and cautious investor sentiment, only time will tell how this rise will influence the broader semiconductor market.
