Shares of Japanese Semiconductor Equipment Maker Kokusai Electric Soar on Tokyo Stock Exchange
Shares of Japanese semiconductor equipment maker Kokusai Electric had a strong debut on the Tokyo Stock Exchange on Wednesday. The stock reached a high of 2,431 yen ($16.22) per share during the trading day, which is 32% higher than the IPO price of 1,840 yen. The initial public offering saw approximately 58.8 million shares sold, raising a total of 108 billion yen and valuing Kokusai at around 424 billion yen. This is Japan’s largest listing since SoftBank’s 2.4 trillion yen listing in December 2018, according to the Japan Times.
Kokusai Electric is a spin-off from Hitachi Kokusai Electric, a subsidiary of Japanese multinational electronics company Hitachi. It was acquired by American private equity firm KKR in 2018 for $2.2 billion.
Expert Opinion on Kokusai Electric’s Stock Performance
However, Mio Kato, founder of research firm Lightstream Research, expressed surprise at the stock’s price move, stating that a 10% increase would have been more reasonable. Kato’s overall view of the stock is mixed, noting that while it is cheap based on historical numbers, it may not be as competitive as its rivals Tokyo Electron or Lasertec, which dominate niche markets in the semiconductor production process.
“Overall, KKR does appear to have done quite well in the deal. So it’s debatable whether they would be looking to maintain that position for a very long time.”
Mio Kato
Lightstream Research
Concerns About Kokusai Electric’s Business Segments
Kokusai’s business segments mainly focus on memory chips, which Kato believes are under pressure. He explains that applications like artificial intelligence use logic chips instead of memory chips, which are commonly used in smartphones. Kato also believes that there isn’t much new innovation in the smartphone space, so if smartphone volumes stagnate, it will put pressure on overall memory volume growth.
Medium-Term Outlook and Potential Downsides
In the medium term, Kato suggests there could be an overhang on the share price despite the initial excitement. He points out that KKR still holds about 110 million shares after the IPO, which it could potentially sell after the 180-day lock-up period. Kato concludes by saying, “Overall, KKR does appear to have done quite well in the deal. So it’s debatable whether they would be looking to maintain that position for a very long time. If they aren’t, then potentially, when you start to look six to 12 months out, that could be a source of downside pressure on the stock.”
