Kioxia Holdings Corp., the Japanese chipmaker formerly known as Toshiba Memory, made waves on Wednesday with its debut on the Tokyo Stock Exchange, concluding its first day of trading with shares soaring over 10 percent above its initial public offering (IPO) price. Kioxia's shares closed at 1,601 yen, valuing the company at approximately 863 billion yen ($5.62 billion). The opening saw shares at 1,440 yen, dipping below the IPO price of 1,455 yen, yet they quickly picked up momentum throughout the day.
With its IPO, Kioxia raised around 29 billion yen by issuing 21.56 million new shares. The company aims to use the capital to fund research and development to meet growing demands for chips needed for artificial intelligence, amid skepticism around the performance of NAND flash memory products. According to industry analysts, the NAND flash market is currently experiencing challenges, particularly following significant price declines due to decreased demand from sectors like consumer electronics.
The IPO raised eyebrows since it is only the second-largest offering on the Tokyo market this year, following the listing of railway operator Tokyo Metro. Despite the less-than-ideal backdrop, analysts noted surprisingly strong investor interest. "The price moves reflect expectations of its recovery," commented Seiichiro Iwamoto, fund manager at Asset Management One. Investors appear optimistic about Kioxia's potential, which could benefit from rising demand from AI-related technologies and consumer electronics such as personal computers and smartphones by next year.
Kazuyoshi Saito, who serves as senior analyst at Iwai Cosmo Securities, characterized the initial debut as having "a calm start," yet noted the sharp afternoon jump was "puzzling" considering the current volatility within the NAND flash market. Saito remarked on the cautious sentiments prevailing among investors due to elevated inventory levels and reduced buying activity due to the market downturn. "The timing of the IPO coincides with a slump in the NAND flash market, leaving many investors cautious. The stock is likely to trade near its offering price in the short term, with limited room for upward movement," he explained.
Historically, Kioxia's path to this moment has been complex and competitive. Kioxia was formerly the memory chip unit of Toshiba, which sought to divest its semiconductor operations during tough economic times. Bain Capital led the acquisition of Kioxia from Toshiba for approximately 2 trillion yen back in 2018. Since then, Kioxia has operated with the expectation of recovering significant investment, yet its IPO plans were repeatedly delayed due to heightened U.S.-China trade tensions and market instability.
The challenges of the NAND flash market are substantial, with prices having dramatically dropped from peaks witnessed earlier this year, which has resulted from weaker-than-expected demand. For Kioxia and its peers, the current market dynamics pose significant obstacles. Nevertheless, analysts report optimism for recovery, with projections of renewed interest for chips driven by the AI sector and bolstered by reinstated consumer spending.
Reflecting on the competitive environment, Jon Withaar, managing director at Pictet Asset Management, noted, "Market appears to have reacted well to the valuation discount being offered. There doesn’t appear to be any urgent selling. Today’s performance bodes well for future private equity exits in Japan, providing valuation is reasonable." Overall, Kioxia's share price performance indicates promising investor sentiments, fueling expectations of gradual improvement within the semiconductor sector over the coming months.
While Kioxia may face hurdles, some analysts remain hopeful for its long-term prospects. "Coupled with recovering demand from data centers, market conditions and Kioxia's performance are likely to improve by the second half of 2024," Saito mentioned, emphasizing the potential for rebound within the rapidly advancing tech and data-centric marketplace.
Despite the current uncertainties, Kioxia's debut may signal broader investor confidence and hopes for advancements within Japan's semiconductor sector, particularly as the government aims to double domestic chip production. The path to its IPO signifies not just resilience but the potential for future growth, as Kioxia navigates the fluctuative tides of the memory chip market.
