Shares in Japan Post Holdings today surged by 26% after the world’s biggest IPO so far this year raised about $12 billion amid unexpectedly heavy demand and claims of under-pricing.
The privatisation of an 11% stake in the postal group, which follows last week’s successful flotation of Poste Italiane, is the culmination of a decade-long effort by successive Japanese governments to reduce state ownership of the group, including its large banking and insurance businesses.
Shares in the parent company Japan Post Holdings were offered at 1,400 yen per share ($11.65) and had already been over-subscribed by five times ahead of the first day of trading. They then soared by 26% to 1,760 yen by the close of trading as investors rushed to buy up a holding in the household name.
There was also strong demand for shares in the two financial subsidiaries, Japan Post Bank and Japan Post Insurance, which were partly-privatised in a triple-IPO package. About 80% of Japan Post shares were reserved for sale within the country, and about 90% of them were sold to private individuals.
But international media cited various analysts as questioning the price level in view of the massive demand. In the run-up to the IPO, the Japanese government carefully considered how to price the postal shares to ensure strong demand from the public amid some reports of relatively low initial interest.
The bulk of the IPO proceeds will be used by the government for rebuilding buildings and infrastructure destroyed by the devastating tsunami and earthquake in 2011.
The Japanese government aims to gradually sell off more tranches in the three companies over the next few years, reducing state ownership of Japan Post Holdings to about one third, while the two financial companies could be fully privatised.
