The shares were priced at 900 Yen ($9) in the IPO and had slipped to 763 Yen ($7.63) by the end of the first day’s trading- a drop of nearly 15%.
Japan Display was put together from the display businesses of Toshiba, Sony and Hitachi. Until this morning, 70% of the company was owned by the government-owned body Innovation Network Corp of Japan (INCJ). INCJ bought its 70% stake in 2012 for $2 billion.
The INCJ stepped in to form Japan Display when Sony, Toshiba and Hitachi were hit by a collapse in TV sales partly caused by the success of Samsung.
This morning’s IPO saw INCJ sell half its 70% stake for $1.7 billion valuing Japan Display at $4 billion – though that value dropped 15% as shares fell in the trading following the IPO.
About 30% of Japan Display’s sales are to Apple and Apple reported lower than expected sales shortly before the IPO.
Underwriters Nomura, Goldman Sachs and Morgan Stanley were left with egg on their faces. Normally underwriters price a business at an IPO at a lower valuation than they expect to achieve.
Bank of America, Deutsche Bank and UBS were also involved in the IPO.
For Japan Display, however, it is a good result as they have some of the proceeds of the IPO to spend on expanding production.
Sony and other investors put 213 million shares up for sale in the IPO, Japan Display created 140 million new shares to be sold at the IPO, and the INCJ were selling 214 million shares.
So the total proceeds were the $1.7 billion raised from the sale of the INCJ shareholding, the $1.9 billion raised from the sale of the shares of Sony and other investors, and the $1.26 billion raised by the sale of the 140 million new shares created by Japan Display.
That, at $9 a share, means that nearly $5 billion was raised and the 15% drop in share price means the underwriters took a $750 million hit.
Let’s hope they don’t need bailing out – again.