Retail returns
The ¥1.435trn (US$12bn) trio of IPOs by Japan Post Group entities in October was years in the making and, not coincidentally, finally achieved under Prime Minister Shinzo Abe as he attempts to boost retail ownership of domestic stocks. In one step, over ¥1trn of stock went to individuals.
The combined offering by parent Japan Post Holding and two of its subsidiaries, Japan Post Bank and Japan Post Insurance – the unattractive postal service is JPH’s other subsidiary company and not up for sale – was the largest government sale since the ¥1.59trn follow-on in Nippon Telegraph & Telephone in 1999 (known as NTT 5). JPH alone is enough to be the largest IPO globally in 2015.
All three IPOs were priced at the top end of their respective ranges, and all performed strongly in the aftermarket for the days following the listings.
The size and significance of the deal made success all the more important for those involved – something that was far from assured earlier in the year when markets were going through a tumultuous summer.
“After we launched, failure was not an option – but we were confident we could do it,” said a banker involved in the deal. “The headwinds were pretty strong in August. There was a lot of uncertainty even as we were pre-marketing and we were very careful to listen to what the investors had to say.”
Leads said the institutional portions of the deals were covered after two days, but with three-quarters of the offerings earmarked for retail there was still a long way to go.
The attractive dividend yields for the floats, from 2.6% to 3.6%, together with the improved market sentiment during bookbuilding, were key to bringing investors into the deals. On the three IPOs, 80% of the shares were sold to domestic investors, of which 95% went to retail.
Retail demand was two to three times the offered shares, despite accounting for such a huge proportion of the deals. On the flip-side, the small allocation for internationals meant their tranches were up to 30 times subscribed.
Japan Post raised ¥693bn, Japan Post Bank ¥597bn, while Japan Post Insurance raised just over ¥145bn.
The listings were the first tranche of a three-part sale aiming to raise around ¥4trn over the coming four to six years to fund reconstruction of areas devastated by the 2011 earthquake and tsunami.
On November 4, shares of Japan Post were up 25.7% on their trading debut. Those of Japan Post Bank rose 15.2%. Japan Post Insurance, by far the smallest of the trio, showed the biggest gain as its shares shot up 56%. The insurer has largely been treading water since, while JPH and JPB are steadily catching up.
Nomura, Goldman Sachs, JP Morgan and Mitsubishi UFJ Morgan Stanley were the joint global coordinators on the IPOs.
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