In Rakuten Bank's downsized IPO, investors pushed for details on troubled parent, sources say

Daiwa Securities

20/04/2023 05:20

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      Most questions from overseas institutional investors -
sources
    

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      Substantial discount was ultimately seen as necessary -
source
    

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      Investors were nervous given banking turmoil -source,
Daiwa
    

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      Rakuten Group set to list in Tokyo on Friday
    

  
    By Miho Uranaka
       TOKYO, April 20 (Reuters) - Japan's Rakuten Bank Ltd
 5838.T  amended the filing of its  $625 million initial public
offering (IPO) after investors pushed for details on the risks
from its exposure to money-losing parent Rakuten Group Inc
 4755.T , two people said. 
    The investor questions, not previously reported, highlight
how concerns about the e-commerce giant's losses and mounting
debt cast a shadow on Japan's biggest IPO in more than four
years that was initially expected to raise about $800 million.
    Investors quizzed the lead manager Daiwa Securities Group
Inc  8601.T  and other banks about risks from Rakuten Group as
they sounded out investor demand for the offering, the people
with direct knowledge of the matter said. 
    Most questions were from overseas institutional investors,
the people said on condition of anonymity as the information is
not public. A U.S. investor asked for details about transactions
with other Rakuten companies, one of the people said.
    "A substantial discount was ultimately seen as necessary,"
one of the people said, adding that a turmoil in the global
banking sector at the time had also put investors on edge.    
    Rakuten Bank declined to comment beyond what it has already
disclosed. Rakuten Group directed Reuters to Rakuten Bank. 
    A Daiwa Securities representative confirmed investors had
asked about Rakuten Group's finances, adding that many investors
were reluctant to invest in banks at a time when widening
financial instability directly impacted the sector.
    The deal "offered a price that would allow investors to buy
with confidence", the Daiwa representative said.
    
    CASH BOOST    
    The IPO will give a much-needed cash boost to Rakuten Group
that has seen four years of losses from the costly build-out and
struggles of its mobile phone business. In February, it reported
a record annual loss of 372.8 billion yen.
    The group has some 400 billion yen in bonds coming due by
2024, a regulatory filing shows.   
    Japan's largest internet bank by number of accounts is set
to list on the Tokyo Stock Exchange on Friday after raising
around 83.3 billion yen ($625 million).
    Although short of the initial target, it is still Japan's
largest IPO since December 2018, according to Refinitiv.
    Rakuten Bank slashed the top of its indicative IPO price
range by almost 30% to 1,400 yen on April 5, a day after
disclosing investments in securitised assets linked to its
parent's businesses, including 2.2 trillion yen ($16.3 billion)
related to the credit card business, regulatory filings show. 
    Rakuten Bank also disclosed a 63.2 billion yen investment in
securitised assets related to the struggling mobile business.  
    Neither amount had been outlined in the IPO prospectus filed
on March 22, a comparison of the two documents showed. 
    It later priced the IPO at the top of the scaled-back range,
valuing the bank at 238 billion yen. 
    Demand from overseas investors was so strong at the lowered
price that bankers ultimately increased the portion of IPO
available to overseas investors, filings showed.
    The overseas portion was still more than 15 times
oversubscribed, Daiwa said.
 ($1 = 134.8900 yen)

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Rakuten Bank's IPO is Japan's largest since 2021     https://tmsnrt.rs/3UPONTV
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 (Reporting by Miho Uranaka; Writing by Mariko Katsumura;
Editing by Nobuhiro Kubo, David Dolan and Himani Sarkar)
 ((Miho.Uranaka@thomsonreuters.com;))