Line, the biggest tech IPO of the year, struggles to show its growth plan can work
In delaying its IPO by two years, Japanese messaging app company Line Corp <3938.T> bought time to correct weak financial reporting controls, work on its business plan, bolster staffing – and left billions of dollars on the table as its valuation shrivelled. Line’s initial public offering in the next three weeks is set to raise about $1 billion, which given a global drought of such deals could make it the biggest tech listing this year, but sceptical fund managers point to tepid growth in Line’s home market and doubts about its prospects for regional expansion. They also question whether its advertising revenue strategy will work.In seeking to earn more from its major Asian markets of Japan, Thailand, Indonesia and Taiwan, Line will try to generate more revenue from services such as advertising and offer more localized products, its IPO filing said. The bulk of Line’s revenue comes from games and sales of emojis and electronic stickers, including Brown the bear and Cony, his flatulent rabbit girlfriend.“Localisation of the service, of the marketing, of the stickers that we provide – this is very important,” CEO Takeshi Idezawa told Reuters in April.Fund managers who have watched Line’s growth slow in a crowded global messaging app market assess the plan with caution.“I’m not interested,” said Yasuo Sakuma, portfolio manager at Bayview Asset Management, which manages 270 billion yen ($2.64 billion). “Its growth outlook is very poor.”“Among the four countries that it’s focusing on, only Indonesia has big room for growth in use,” he added. “Even there, the business outlook is not that easy.”Growth in Line’s monthly active users has tailed off after tripling across the world over the past three years. Last year, user numbers rose just 13 million to 218 million at the end of March, the IPO filing showed. The company isn’t providing much visibility about the future either – it says in its filing that limited operating history makes it “difficult” to forecast future results. Globally, Line is the seventh-most used messenger app, data from researcher Statista shows, behind the likes of Facebook’s (>> Facebook Inc) WhatsApp and Tencent’s (>> Tencent Holdings Ltd) WeChat.