The main manager of the Tokyo subway made a sensational debut on the stock market on Wednesday, its stock soaring by some 45%, boosted by the appetite of individual investors for the biggest stock market debut in six years in the country.
Tokyo Metro Co. stock ended its first day of trading at 1,739 yen on the Tokyo Stock Exchange, a 45% jump from its IPO price of 1,200 yen (7.4 euros), after gaining up to 47% in session.
It went against the trend of a Tokyo market at half mast, where the flagship index closed down 0.80%.
A sign of enthusiastic demand, much higher than the number of securities offered, the Tokyo Metro issue was oversubscribed fifteen times according to the financial press: widely publicized, the operation aroused great enthusiasm among the general public.
Born in 1927 – making it the oldest in Asia – the Tokyo metro enjoys an extremely positive image, with its dense, very well-connected network and its air-conditioned, clean and extremely punctual trains.
Established in 2004, Tokyo Metro Corp. operates nine subway lines in one of the most densely populated urban areas in the world, a network 120 miles (195 km) long in total carrying 6.52 million passengers per day, double that of the New York subway system.
-Predictable income-
As keen to convince institutional investors (investment funds, banks, etc.) as to attract small individual shareholders, considered less interventionist, Tokyo Metro has multiplied the advantages for the latter.
Holders of 200 shares or more will be able to get free tickets, free access to its museum and golf course, and free “tempura” (fried) toppings at the group’s noodle shops.
With predictable income and therefore “low volatility” expected, securities like Tokyo Metro constitute a safe investment prospect for Japanese households, Hideaki Miyajima, professor at Waseda University in Tokyo, told AFP.
With the strong recovery in its post-pandemic attendance and the record influx of foreign tourists, attracted by a weakened yen, Tokyo Metro posted for its 2023-24 financial year, ended last March, a net profit up 67% over one year.
The title’s thunderous debut on the stock market can only galvanize stock marketers and small shareholders even more.
With strong demand remaining unsatisfied, “the company will have the possibility of issuing shares again in the future to finance itself”, explains to AFP Shiki Sato, analyst at Toyo Securities, estimating that the title “should continue to progress smoothly” without necessarily taking off again.
As for foreign institutional investors, “the Japanese market is very favorable to them due to the very low exchange rate of the yen and recent reforms in corporate governance,” adds Mr. Miyajima.
The operation allows the company to raise 349 billion yen, or 2.3 billion dollars.
Which makes it the largest stock market debut in Tokyo since SoftBank Corp, the mobile telecommunications subsidiary of the SoftBank conglomerate, which raised the equivalent of $23.5 billion in 2018.
-Test for the market-
It is also the first significant privatization in a decade and notably the IPO of Japan Post, which raised $12 billion in 2015.
The capital of Tokyo Metro was 53.4% held by the Japanese government and 46.6% by the Tokyo metropolitan authorities: after the IPO, they between them retained 50% of the capital.
The sums raised should make it possible to repay the debts contracted by the State to rebuild infrastructure destroyed by the 2011 tsunami in the north-east of the country.
Analysts, however, remain cautious about the long-term prospects of the group – valued at 700 billion yen (4.28 billion euros) at the time of its listing – in a country marked by the aging of its population.
And as a public service, its room for maneuver will be limited to increase the prices of its tickets to boost its profits.
For now, the listing of Tokyo Metro is seen as a test as the new government of Shigeru Ishiba, which faces difficult legislative elections on Sunday, seeks to boost businesses to revive sluggish economic activity.
A performance that is all the more closely watched as the Japanese group Kioxia, a global giant in memory chips, is expected to postpone its own stock market debut until the beginning of next year.
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