Shares of Japan's memory-chip maker, Kioxia Holdings Corp. rose more than 6% on their Tokyo Stock Exchange debut, trading at ¥1,531, slightly above the IPO price of ¥1,455. The private equity-backed chipmaker's listing marks a major milestone for Bain Capital, which acquired Kioxia (formerly Toshiba Memory) in 2018 for $18 billion. Despite a tumultuous road to listing, including the cancellation of previous IPO plans and a failed merger with rival Western Digital, Kioxia's debut signals investor confidence, with the company now valued at ¥796 billion ($5.2 billion).

A Long Road to Listing

This debut marks Kioxia's third attempt at going public. Initially set for 2020, the listing was delayed by market uncertainty, worsened by the pandemic and escalating US-China trade tensions over semiconductor technology. In 2023, Bain Capital's efforts to merge Kioxia with Western Digital to create a global memory chip giant also collapsed, further postponing the IPO.

Despite these setbacks, Kioxia's stock price rallied after a sluggish start, reaching ¥1,531, up 6.4% from the initial listing price of ¥1,440. The stock's late recovery offers some relief for Bain, which had hoped to capitalize on the boom in chip and AI stocks but faced concerns over the semiconductor market's health and valuation expectations.

Kioxia's Struggles and Market Context

Kioxia's IPO comes after significant challenges. The company, the world's third-largest flash memory maker behind Samsung and SK Group, has seen its revenues shrink by 30% over the past two years, dropping to approximately ¥1 trillion in the 12 months leading to March. The downturn is attributed to sluggish smartphone sales post-pandemic. The company reported an operating loss of ¥252 billion, underlining the volatility in the memory chip market.

The listing's market capitalization of ¥796 billion is considerably lower than Bain's original 2018 purchase price and well below earlier expectations, which had anticipated a valuation of up to $10 billion.

A Strategic Private Equity Move

The IPO highlights Japan's growing significance as a target for private equity deals. Bain's acquisition of Kioxia in 2018 was one of the largest private equity buyouts in Asia, set against the backdrop of a financial crisis at Toshiba. It also set the stage for Japan to become the world's second-largest private equity market, after the US.

Kioxia's stock price performance reflects a broader trend in Japan, where activist pressure is pushing companies to divest non-core assets. Bain's involvement in Japan is not limited to Kioxia. The firm is also engaged in a high-stakes battle with KKR over the buyout of Fuji Soft, a significant IT company with substantial real estate holdings. Despite competing offers, Bain is determined to pursue its bid for Fuji Soft without board approval, highlighting its aggressive stance in the Japanese market.

Conclusion

While Kioxia's IPO did not immediately “set the market on fire,” the 6.4% rise in share price offers cautious optimism. Investors have been drawn to Kioxia's low IPO price and its potential recovery amid global demand for memory chips in data centers and AI applications. Despite the company's recent struggles, the IPO reflects a pivotal moment in Bain Capital's long-term strategy, as Japan continues to attract major private equity investment.