Kioxia ditches plans of $3.2 billion IPO amid tensions

Kioxia ditches plans of $3.2 billion IPO amid tensions

Leading Japanese chipmaker, Kioxia, shelves $3.2 billion IPO plan as U.S.-China tensions continue to loom

Kioxia Holdings Corp currently ranks as the second-largest maker of flash memory chips in the world. According to sources, the company has shelved plans for its IPO that was to raise about $3.2 billion. The IPO would have been the largest initial public offering (IPO) in Japan this year, with the move to shelve the IPO attributed to the current US-China tensions.

Previously known as Toshiba Memory, Kioxia initially planned to list on the Tokyo Stock Exchange on October 6, 2020, a move that would offer up to 334.3 billion yen ($3.2 billion) in shares. The postponement news literally shook the capital market, with shares in top shareholder Toshiba Corp, which had planned to sell an 8% stake, falling as much as 8.6%before paring the losses to 3%.

The postponement of the IPO further highlights the impact of the disputes over trade and technology between Washington and Beijing on the global chip industry and its effect on companies across the supply chain.

The global memory chip market is already bracing for the effect of tighter U.S. restrictions on Huawei Technologies Co Ltd that became effective on September 15. The curbs include the ban ofglobal suppliers from selling chips made using U.S. technology to the Chinese telecoms giant without a special licence. Kioxia has issued a warning that the curbs could lead to memory chip oversupply and lower prices.

The company cited “market volatility and ongoing concerns about a second wave of the (COVID-19) pandemic” as reasons for putting off the IPO.

While we received significant interest from many investors, the lead underwriters and Kioxia do not believe it is in the best interest of current or prospective shareholders to proceed with the IPO at this time,” Kioxia CEO Nobuo Hayasaka said in a statement. “We are not in a rush.”

Earlier in the month, Kioxiaannounced a tentative IPO price range that put the market value lower than the 2 trillion yen paid by a Bain Capital-led group for the company a couple years ago. The consortium’s stake was to drop from 56.2% to 47.8%.

According to Toshiba, the intention was to return most of the IPO proceeds to shareholders and the company expressed its disappointment at Kioxia’s decision. Bain Capital has, however, declined to comment on the recent developments.

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