A landmark change in Japanese stock market rules has presented Bain Capital with the opportunity to revive the initial public offering of Kioxia, the former memory chipmaking unit of Toshiba after a listing was shelved amid US-China trade tensions.
The Tokyo Stock Exchange rule change would allow the private equity firm to sell a 10 per cent slice of the chipmaker to investors before the current window closes in February, said people familiar with Kioxia’s listing plans.
Bain is considering ways to take advantage of the new rule, say people familiar with its thinking. The more limited scale of the listing would raise substantially less than originally intended but bankers say it should enable a more rapid bookbuilding process.
If the February deadline is missed, the IPO that was originally planned to raise about $3.6bn and would have been Japan’s largest of 2020 could be delayed until late 2021 while Kioxia resubmits its listing application using new figures from the financial year that ends in March.
Kioxia was carved out of Toshiba in 2018 after the Japanese technology conglomerate was pushed to the brink of bankruptcy by the collapse of its US nuclear business. The eventual $18bn sale of the chip unit to a consortium led by Bain left Toshiba with a 40 per cent stake in what was once its crown jewel.
The new rule states that for larger public offerings, only 10 per cent of the company’s total stock must be tradable on the listing date. The previous minimum, in force when the Kioxia IPO was postponed three months ago, was 35 per cent.
The new provision affects companies planning to list on the prestigious first section of the TSE, and requires them to commit to raising the tradable share ratio to 35 per cent within five years.
Kioxia declined to comment on its IPO plans.
The listing was abruptly pulled in late September on the day it was due to price, as rising uncertainty caused by the US-China trade dispute sent shockwaves through the tech sector and fuelled concerns Bain would not be able to secure the valuation it was seeking.
Kioxia, the world’s second-largest producer of NAND flash memory chips, in August had hoped to price the offering at ¥3,960 ($38) a share but later lowered the range to ¥2,800-¥3,500.
The decision to postpone the IPO came shortly after the US government implemented sanctions against Semiconductor Manufacturing International Corporation, China’s biggest chipmaker, after cutting telecoms group Huawei off from American chip suppliers.
The renewed push for an IPO coincides with a brighter outlook on the US-China front after Washington granted Kioxia special permission to export some chips to Huawei, according to people close to the company. Kioxia generates less than 10 per cent of its annual revenue from Huawei.
Nevertheless the geopolitical concerns remain significant, said people familiar with Kioxia’s listing plans, as do uncertainties over whether the administration of US president-elect Joe Biden will seek to defuse tensions with Beijing.