Socionext defies chip slump with Japan's biggest IPO this year
12/10/2022 10:19
By Sam Byford
TOKYO, Oct 12 (Reuters) - Making its market debut on
Wednesday, Japan's Socionext Inc 6526.T bucked softening
sentiment toward chips by surging 15% in Tokyo's biggest initial
public offering of the year so far.
Shares in the fabless system-on-chip design company closed
up 15.07% at 4,200 in their debut on Tokyo's prime market from
the initial offer price of 3,650 yen.
The total deal size was 76.8 billion yen ($525 million),
including an overallotment of 2.74 million shares. Wednesday's
closing price values the company at around 141 billion yen,
according to Refinitiv data.
"I would say that the deal has done decently well as there
was a lot of positive sentiment going into the deal," said
Clarence Chu, an analyst at Aequitas Research who covers IPOs in
Asia. He pointed to the upsizing and high number of long-only
investors as reasons for optimism.
Ahead of the listing the company had "upsized" the deal
-increasing the number of shares on offer to 18.3 million from
11.8 million, not including the overallotment.
Based in Yokohama, Socionext was formed in 2015 out of a
merger between chipmaking units at Fujitsu Ltd 6702.T and
Panasonic Holdings Corp 6752.T . The Development Bank of Japan
was also a part-owner, taking an initial 40% stake.
Systems-on-chip, or SoCs, are complex products that combine
multiple core components of an electronic device onto one chip,
which can help optimise for cost and power efficiency.
Socionext says it designs SoCs for clients including major
automakers and 5G vendors. As a so-called fabless company, it
solely designs chips and relies on the likes of Taiwan
Semiconductor Manufacturing Co Ltd 2330.TW for the actual
assembly and manufacture of the products.
"In our view, its transition towards a focus on custom SoCs
in recent years is where the firm's growth angle really starts
to take shape," said Chu, citing Socionext's move into areas
like lidar, a 3D depth-sensing technology used in autonomous
cars.
"Notably, its sales exposure towards the faster growing
automotive segment, wherein its chips are used in lidar, car
navigation etc, has been increasing," he said.
The strong debut comes amid a lacklustre environment for
both semiconductor stocks and Japanese IPOs.
The Philadelphia semiconductor index .SOX is down nearly
15% since the start of last month, having been hit by reports of
slowing iPhone production, earnings warnings from companies
including Advanced Micro Devices AMD.O and Samsung Electronics
005930.KS , and U.S. chip sanctions on China.
Adding to the headwinds, recent IPOs in Japan do not have a
strong track record. Data from Aequitas Research posted on
Smartkarma shows the last three major deals made negative
returns by the end of their first week.
But Chu said Socionext was coming in at a "wide discount" to
international peers.
"So even if peers traded downwards, Socionext still appears
cheap next to them."
($1 = 146.2400 yen)
(Reporting by Sam Byford; Editing by Simon Cameron-Moore)
((Sam.Byford@thomsonreuters.com;))