Japanese Chip Equipment Maker Kokusai Electric Trims IPO Pricing by 3%
Lower Pricing Reflects Chip Designer Arm’s Performance
Japanese chip equipment maker Kokusai Electric has decided to reduce the indicative pricing for its initial public offering (IPO) by approximately 3%. The adjustment is partly due to the lackluster performance of chip designer Arm. In a regulatory filing, Kokusai stated that the new price range is set between 1,830 and 1,840 yen per share, compared to the previous price of 1,890 yen.
Institutional Investors and Market Conditions Influence Decision
Kokusai Electric explained that the decision to lower the indicative price range is based on the perspective of institutional investors and the current state of the stock market. The underwhelming performance of SoftBank Group’s Arm, which went public last month, was also a contributing factor. The decline in Arm’s share price influenced Kokusai’s decision to adjust its IPO pricing.
Implications of the IPO Pricing Adjustment
If the IPO prices at the top end of the range, Kokusai Electric will offer shares worth 108.3 billion yen ($729 million), resulting in a market valuation of 423.9 billion yen, excluding any overallotment. The company has received commitments from Capital Research and Management and Lazard Asset Management to purchase shares at the offer price.
Key Customers and Market Outlook
Kokusai Electric’s largest customers include Samsung Electronics, TSMC, and Micron Technology, which collectively account for over 40% of its revenue. However, the chip industry is currently facing challenges due to a slump in the market for smartphones and personal computers. Investors are closely monitoring the outlook for chip demand, particularly as capital flows towards companies involved in artificial intelligence.
Industry Challenges and Expectations
Samsung is expected to report an 80% slump in profit in its upcoming quarterly earnings due to slow recovery in rock-bottom memory chip prices. Micron Technology also recently forecasted a quarterly loss. These developments highlight the volatility and uncertainty in the chip industry.
Overall, Kokusai Electric’s decision to adjust its IPO pricing reflects the company’s response to market conditions and the challenges faced by the chip industry. The move aims to ensure a successful IPO and attract investors in a highly competitive market.
