SoftBank considering US listing for its PayPay business - sources

LY

12/07/2023 07:44

* 
      U.S. listing attractive due to higher valuations - source 
    

        * 
      PayPay needs to demonstrate path to profitability - source
    

        * 
      Z Holdings shares jump almost 6% 
    

        * 
      SoftBank targeting U.S. listing for chip designer Arm
    

  
 (Adds share reaction, analyst comment)
    By Sam Nussey and Miho Uranaka
       TOKYO, July 12 (Reuters) - SoftBank is considering a
U.S. listing for its PayPay payments business, three sources
familiar with the matter said, in what could mark another
American listing for Masayoshi Son's sprawling tech conglomerate
along with chip designer Arm.  
    New York is seen as a more attractive destination than Tokyo
for listings given the higher valuations tech companies
generally achieve there, one of the sources said. The timing of
the listing was still unclear as money-losing PayPay needs to
first demonstrate a clear path to profitability, the source
said.
    SoftBank has previously set a PayPay listing as a goal, with
one executive saying in November it was worth just under 1
trillion yen ($7.17 billion). That the conglomerate is
considering a U.S. listing has not been previously reported.
    Representatives for PayPay and SoftBank Group's  9984.T 
domestic telecoms business, SoftBank Corp  9434.T , said they
would not comment on speculation. PayPay is owned by SoftBank
Corp, its internet business, Z Holdings  4689.T , and the
group's second Vision Fund. 
    All of the sources declined to be identified as the
information is not public.
    SoftBank Group shares closed up 2%, with Z Holdings surging
almost 6% in their biggest one-day gain since February.
    Listings of Japanese companies in New York are rare.
Tokyo-based chat app operator Line had a dual listing in 2016
and later merged with SoftBank's internet business, with more
recent examples including the listing of Syla Technologies
 SYT.O  in March, according to Dealogic. 
        "Z Holdings shares reacted on hopes that a U.S. listing
might invite a premium valuation but recent domestic listings
for Rakuten Bank and SBI Sumishin Net Bank indicate there is
room for fintech listings locally," said analyst Kirk Boodry at
Astris Advisory Japan, who values PayPay at 800 billion yen to
900 billion yen.
        
  
    
    NARROWING LOSSES     
    SoftBank founder Son recently pledged to shift to "offence
mode" amid rising global interest and investment in artificial
intelligence. He has been playing defence for some time, curbing
his investments after the tech sell-off hit the value of his
portfolio companies hard.
    PayPay, which offers QR code payment services, is used by
more than 55 million people in Japan, making it a top player in
a crowded digital payments market. 
    It has benefited from a government-backed effort to
encourage consumers to shift towards digital away from cash and
grew quickly by offering aggressive rebates. 
        PayPay booked a loss before interest, taxes,
depreciation and amortisation of 11.9 billion yen in the year
ended March, compared to a loss of 43.2 billion yen a year
earlier. 
    The telecoms business is targeting profitability for its
financial unit, which includes PayPay, by the year ending March
2026. PayPay is the most widely mobile payment service in Japan,
according to a survey of users by Mobile Marketing Data Labo. 
    SoftBank is planning an initial public offering for
Cambridge, England-based chip designer Arm in the U.S. as it
looks to raise funds following the slump in tech valuations.
($1 = 139.5500 yen)

 (Reporting by Sam Nussey and Miho Uranaka; Additional reporting
by Scott Murdoch; Editing by David Dolan and Muralikumar
Anantharaman)
 ((sam.nussey@tr.com;))