Tokyo Metro raised $2.3 billion in Japan's biggest IPO in six years

Tokyo Metro Co. raised 348.6 billion yen ($2.3 billion) in Japan's biggest initial public offering (IPO) in six years, according to the company's filing with the regulator, Reuters reports.

The IPO of Tokyo Metro, the operator of the Japanese capital's subway network, was oversubscribed more than 15 times, according to sources close to the deal, who said many investors were attracted by the Japanese company's reputation and dividend policy.

Tokyo Metro has priced the shares in the IPO at 1,200 yen/share, respectively at the upper end of the expected range of 1,100-1,200 yen. The price gives Tokyo Metro a dividend yield of 3.3%, based on an estimated dividend of ¥40 per share for the financial year ending in March 2025.

The company, which sold 232.4 million shares to local investors and 58.1 million shares to foreign investors, is expected to list on the Tokyo Stock Exchange on October 23. The share of shares allocated to retail investors (almost four-fifths of the total) was oversubscribed about ten times, while the shares allocated to domestic (1.5%) and foreign institutional investors (20%) were oversubscribed by more than 20, respectively 30 times, according to sources. The Japanese company specified: "The total number of shares requested was much more than the number of shares sold".

Tokyo Metro is Japan's largest IPO since SoftBank Group listed its telecommunications division in late 2018, raising $21 billion. From the beginning of the year until now, the value of the listings carried out in Japan is 1.6 billion dollars, and by adding the Tokyo Metro IPO, the figure approaches 4.4 billion dollars, the amount raised throughout 2023.

The Tokyo subway was created in 1920, with the establishment of the Tokyo Underground Railway Co. Seven years later, the company inaugurated the first subway line in Japan, between the Asakusa and Ueno districts of Tokyo. Tokyo Metro operates 195 kilometers of lines and carries 6.5 million passengers daily. Currently, the company also has real estate and retail divisions. The Japanese central government owned, before the IPO, 53.4% of Tokyo Metro shares, the rest being controlled by the local authorities in Tokyo. Their combined holdings are halved following the IPO.

The company's IPO follows the listing of other Japanese rail operators, including Kyushu Railway, in 2016. The company reported a net profit of 46 billion yen for the financial year ending March 31, 2024, up more than 60% from a year earlier . Brokerage firms Nomura, Mizuho and Goldman Sachs handled the Tokyo Metro IPO.

Also in Japan, Rigaku, a maker of X-ray testing tools backed by investment firm Carlyle Group, plans to list this month, according to Reuters. Instead, Bain Capital-backed chipmaker Kioxia abandoned its plan to launch an IPO in October.

Japan's stock market suffered a historic crash in early August, triggered by a surprise interest rate hike and fears of a US recession, after which it recovered. The benchmark Nikkei 225 index has risen by around 20% this year.