Line Applies to List Shares in Tokyo

By Dow Jones Business News, 
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TOKYO--Line Corp., the developer of a fast-growing smartphone messaging application, has applied for an initial public offering on the Tokyo Stock Exchange that could value the company at more than Yen1 trillion ($9.84 billion).

A person familiar with the matter said Tuesday that Line, based in Japan but owned by South Korean Internet portal operator Naver Corp., will also likely submit an application for a listing on the New York Stock Exchange and could go public as early as this autumn.

While it isn't clear how large a stake Line intends to sell to the public, the IPO is expected to be one of Japan's biggest new stock offerings this year. But it will be substantially smaller than the pending listing of Alibaba Group Holding Ltd., the Chinese Internet giant that is planning to list in New York in the summer. People familiar with that deal have said Alibaba's IPO could raise more than $20 billion, valuing the whole company at more than $100 billion.

Still, the sale would be sizable by the standards of the Tokyo market, which has had a relative dearth of Internet mega-IPOs since the dot-com boom and bust when companies like Rakuten Inc., an e-commerce provider, went public. According to Dealogic, the last listing of an Internet-linked company was Japan's social-network game operator Gree Inc.'sYen3.6 billion capital raising in 2008.

Line provides free voice calls and messaging and generates revenue from the sale of cutesy emoticons, games and other services. For the first quarter of this year, the company reported sales of Yen14.6 billion, more than triple its sales from a year earlier and up 19% from the fourth quarter. It competes with WhatsApp, which Facebook Inc. this year agreed to buy for $19 billion, and WeChat, which is owned by China's Tencent Holdings Ltd. Line says it has more than 480 million registered users world-wide. Unlike other popular messaging applications, however, it hasn't disclosed how many of those users are active monthly, and analysts say that figure is considerably lower than WhatsApp which has more than 500 million monthly active users.

While Line is most popular in Japan, it is also looking to expand beyond the country. It has established a strong presence in places like Thailand and Taiwan, as well as parts of Europe and Latin America. Analysts expect it to use proceeds from the IPO to finance marketing and other initiatives aimed at growing its services in the U.S., China and other markets.

"The IPO will not only help them get further visibility in markets outside Asia, but the resources can also be put to further marketing efforts to grow their user base internationally," said Neha Dharia, an analyst at Ovum, a telecommunications consultancy.

While Line is a ubiquitous presence on the touch screens of Japanese teenagers' smartphones, the app has suffered negative publicity in recent weeks because of a rash of hacking incidents. The company said this month that there had been 300 reported cases since the first hack was reported in late May. Several users have suffered financial losses as a result of the hacking, according to police.

Following the WhatsApp deal, market players have been watching Line to see whether it would be sold to a bigger player or go public to raise money. But Line executives have said they would prefer to take the IPO route.

Messaging apps are increasingly costly acquisition targets for Internet giants, as highlighted by the WhatsApp purchase price. But the growth of Line, which analysts say is profitable, shows that messaging apps can be used as a platform to monetize mobile content services, making them potentially attractive to investors.

Line is working with Nomura Holdings Inc. and Morgan Stanley on the listings. A spokeswoman for Line declined to comment.

Nomura said in March that it expected up to 80 companies to list their shares in Tokyo this year, up from 58 last year, with the total value of the IPOs likely to top Yen1 trillion, more than double the amount last year. In January through June, the number of IPO deals came to 30, the highest level since 2008. There were 27 IPOs in the comparable period a year earlier, according to Dealogic.

The offerings have included the high-profile listings of companies like Apple Inc. supplier Japan Display Inc. and hotel and railroad operator Seibu Holdings Inc.

Write to Eric Pfanner at eric.pfanner@wsj.com and Atsuko Fukase at atsuko.fukase@wsj.com

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This article appears in: IPOs

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