Japan Post Goes Public With This Year’s Largest IPO – Country Raises $12 Billion As It Seeks To Revive Economy
Japan Post had its IPO debut along with its two financial units on Tokyo Stock Exchange. The IPO debuts are among the largest in the country after Alibaba raised $25 billion in 2014.
Shares of Japan Post Co. and two other public companies surged after investor frenzy. Shares of Japan Post Holdings Co. jumped 26 percent during the first day of its maiden trading to 1,760 yen at the close of trading on Wednesday in Tokyo. Its financial unit, the Japan Post Bank Co., saw its shares climb 15 percent to 1,671 yen. However, trumping both the companies, shares of Japan Post Insurance rocketed 55.9 percent to 3,430 yen. Collectively, the companies managed to raise $11.9 billion in the world’s biggest Initial Public Offering this year, reported Bloomberg.
The massive IPO pushed the benchmark Nikkei 225 index to its highest level in over two months. Though it shed a few points, at the end of the day, Nikkei was up an impressive 1.3 percent to 18,926.91. The government of Japan is indeed quite happy, as it intends to use the majority of the funds to enact economic policies that are meant to revive Japan’s sluggish growth.
Speaking about the IPO debut, Japan Post president Taizo Nishimuro said, “Through privatization, we can play a role in revitalizing the Japanese economy.”
Japan Post’s IPO debut marks a crucial milestone in the long-drawn political battle to privatize the postal service. Incidentally, several other countries, including U.K., Italy, and Belgium, have already privatized theirs. Britain’s Royal Mail Plc. had its IPO debut in 2013, and Italy’s Poste Italiane SpA was publicly listed last month.
Interestingly, the sale of the trio’s shares weren’t offered to financial institutions with deep pockets. Instead, on the insistence of Prime Minister Shinzo Abe, common citizens were offered the chance to buy shares. This innovative technique was meant to urge people to invest more of their savings into shares and debentures.
The Japanese have traditionally been very conservative about their savings and have nestled away more than $14 trillion in savings accounts that don’t offer much in returns and can’t be strategically invested by the institutions. In other words, the money is merely sitting idle, and the prime minister wanted his country’s citizens to inculcate the habit of investing in the share market. The postal system and the postal banks are the backbone of the country’s massive household savings pool, reported Al Jazeera.
The Japanese still trust their postal system. The 140-year-old Japan Post has over 24,000 outlets spread throughout the country. However, modern technology and improved access to competitive financial institutions have been eroding the once financially lucrative appeal of the three public companies. However, that didn’t stop the people from buying the shares, which were sold at the top end of the prices indicated by financial experts.
Surprisingly, despite raising almost $12 billion, only 11 percent of the government’s equity was made available for trading on the share market. However, the country ensured that 80 percent of the shares made available were reserved for domestic investors, while the rest was up for grabs for foreign buyers. The government plans to slowly introduce more shares of Japan Post, but it will retain majority ownership.
As privatization slowly spreads in the country, Japan hopes to achieve better efficiency not just in the government machinery, but in private banks and financial institutions. Japan’s state-owned institutions faced severe restrictions in the types of businesses they could invest in. However, with the Japan Post IPO, they would have a lot of operational freedom. This is because the institutions would have to ensure a decent Rate of Return (ROR), one that is bound by the laws of economics and not those of the state.
[Photo by Tomohiro Ohsumi / Getty Images]