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Screen maker’s IPO ‘a disaster’

by Hiroshi Hiyama

AFP-JIJI

Shares in Japan Display, the world’s biggest maker of screens for smartphones and tablets and a key Apple supplier, lost more than 15 percent of their value Wednesday following a $3.2 billion initial public offering.

The stock, which at one stage lost more than a fifth of its value, ended at ¥763, a 15.2 percent drop from its ¥900 listing price, with one analyst describing the losses as a “disaster.”

The Nikkei stock average finished 0.36 percent higher.

While insisting that demand was strong, the LCD maker last week priced the offering at the low end of expectations, suggesting that investors were wary of the sale.

Japan Display holds a leading 16 percent in the growing $35 billion global market for smartphone and tablet screens, according to U.S.-based research firm NPD Group.

Its IPO was one of the biggest in Tokyo since Suntory’s food-and-beverage unit raised $3.9 billion in 2013.

Analysts had warned that Japan Display faces tough competition from lower-cost countries, including China, South Korea and Taiwan.

To address this the firm — set up in 2012 through a merger of money-losing LCD units from Hitachi, Toshiba and Sony — is looking to boost production of small and medium-sized screens.

But Seiichi Suzuki, market analyst at Tokai Tokyo Securities, said: “This is a company that was made up of units offloaded by their parent firms. (It doesn’t) have a bright future.”

He said the firm should not have “forced its listing,” citing a tough market environment with the Nikkei average down around 10 percent this year.

Japan Display had earlier said it would sell 140 million new shares between ¥900 and ¥1,100, while its major private shareholders would offload 213.9 million shares.

“A disaster, no doubt,” Lorne Steinberg, head of Montreal-based Lorne Steinberg Wealth Management, told Dow Jones Newswires.

“The deal must have been either badly mispriced or the investor base was misjudged. In North America, dealers routinely support IPOs so that this type of opening performance could only happen if the entire market was also going suddenly bad at the same time.”

Chris McGuire, chief executive of Chicago-based hedge fund Phalanx Capital Management, dumped all the shares his firm had bought at the open.

“The steep price fall is extremely disappointing and shows that the deal was overpriced at issue,” he said.

Apple accounts for nearly a third of Japan Display’s revenue, but the firm also deals with other top gadget makers such as Samsung and Microsoft.

The company was formed to help Japanese firms better compete in high-resolution display technology, which has become the standard for smartphones, tablets and other electronic devices.

The government-backed Innovation Network Corp. of Japan held about a 70 percent share in the firm with the three electronics giants each claiming a roughly 10 percent stake.

Many Japanese electronics and technology giants have struggled in recent years as they face price undercutting by foreign rivals and painful losses in some consumer product units, including televisions where profit margins are wafer-thin.

Once mighty firms such as Sony and Panasonic have been undergoing painful restructuring in a bid to move past years of losses.

Sony said this month that it would sell properties at a prestigious Tokyo site where it had its headquarters for six decades, as the once world-beating firm struggles to repair its bottom line.