Line Corp. is aiming to raise as much as $1 billion in an initial public offering in July, putting Japan's most popular mobile-messaging service on track to become this year's biggest market debut for a technology company.
Line will sell shares in the U.S. and Japan at a valuation of about $5.5 billion, according to data from a filing Friday. The offering is for 35 million new and existing shares, with an over-allotment of 5.25 million shares. The price range will be set on June 27, and the final price on July 11, the Tokyo-based company said.
Line, owned by South Korean search portal Naver Corp., initially filed for an IPO in 2014 but held off as it waited for market conditions to improve. They didn't, and now Line is raising funds as it confronts mounting challenges from China's WeChat and Facebook's Messenger and WhatsApp. The Japanese app has 218 million monthly active users, compared with about 2 billion for Facebook's services and 762 million for WeChat, owned by Tencent Holdings.
"Line faces a challenging battle against their global rivals," said Yasuhide Yajima, chief economist at NLI Research Institute. "The dual-listing in the U.S. and their home-market could help Line to strengthen their brand, particularly in the States, but it would still be a tough race with the existing players there."
Nomura Holdings, JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group are the lead underwriters.
Line, which debuted in 2011, pioneered the business model of selling stickers and other digital knickknacks that people buy and share during chat sessions on mobile phones. Its revenue grew 40% last year to $1.1 billion, with games, streaming music and comics accounting for 41%.
While the company cited rising costs related to business expansion and higher payouts related to smartphone settlement and royalties, it said content and advertising sales were robust.
"Line's valuation reflects not just the overall worsening of the IPO market but also the slowing pace of expansion for the company's subscriber base," said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo.
Line plans to sell almost two-thirds of its offering in the U.S., an unusually large allocation for a Japanese company. It will also list the shares in New York on July 14, and then July 15 in Tokyo. The IPO would be this year's biggest tech offering globally, according to data compiled by Bloomberg, providing a rare bright spot for the moribund listings market. No business has raised more than $150 million in a technology listing in 2016, even though more than 160 startups are currently valued at $1 billion or more.
Plans to take Line public stretch back two years, when it submitted an application for a listing on the Tokyo Stock Exchange, and also filed confidentially for a U.S. IPO, people with knowledge of the matter said at the time. The company decided then not to hold a public offering, and also passed on it again last year.
"The conditions and environment are favorable for growth and overseas development. We believe that this is the best timing," said Shin Ichikawa, a spokesman for Line.
While Line is No. 1 in Japan, Thailand and Taiwan, Chief Executive Officer Takeshi Idezawa, 43, is betting that the messaging service will be able to snap up users in the Middle East, tapping into a pool of more than 1 billion people in regions where there isn't a dominant messaging service.
Despite its push into Asian markets, the company still generates most of its sales at home. While Japanese users accounted for 27% of Line's monthly active users, 69% of its revenue came from Japan in the fourth quarter of last year.
"In a bid to build a more solid foothold in Asia, the company will accelerate their efforts to grab more users in Southeast Asian market," said Mr. Yajima, the NLI Research Institute economist.
-- Bloomberg News