Japan’s LINE faces difficulty in showing growth plan can succeed ahead of biggest tech IPO
AS popular messaging app LINE prepares for the biggest tech IPO of 2016, the company is reportedly struggling to convince skeptical fund managers that its growth plan can work.
Over the next three weeks, LINE’s initial public offering is aiming to raise about US$1 billion, potentially making it the largest tech listing of the year.
However, as popular as it is, the company’s growth in its home market of Japan has been stalling since late last year.
In October, LINE revealed that it had grown to 212 million monthly active users (MAUs), of which 65 percent came from their four main markets – Japan, Taiwan, Thailand and Indonesia.
Despite the number of MAUs increasing, the data shows that LINE has no new markets, instead depending on just those four countries, leading to stagnation, reported Tech in Asia.
This lukewarm growth is what fund managers are dubious about, according to Reuters. They are skeptical about the company’s potential for regional expansion, and have also called its advertising revenue strategy into question.
LINE currently gets about 35 percent of its revenue from advertisers, and 22 percent from communications-related products, which include its popular “stickers” that can be purchased from within the app.
Yasuo Sakuma, a portfolio manager at Bayview Asset Management, told Reuters he would not be interested in LINE’s IPO as its growth outlook is “very poor”, adding that out of its four main markets, only Indonesia has the potential for growth but its “business outlook is not that easy”.
The company, a Japanese subsidiary of Korean internet search giant Naver, appears to be aware that growth is not its strong suit – it has pitched its IPO with emphasis on value and steady returns, rather than huge growth potential.
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