Japan Display shares plunge on Tokyo debut

Japan Display shares plunge on Tokyo debut
iPad Air

iPad Air (Photo credit: John.Karakatsanis)

Shares in Japan Display — the world’s biggest maker of screens for smartphones and tablets and a key Apple supplier — plunged on their Tokyo debut Wednesday, following a $3.2 billion initial public offering.

The stock, which at one stage lost more than a fifth of its value, ended at 763 yen, a 15.2 percent drop from its 900 yen listing price, with one analyst describing the losses as a “disaster”.

The benchmark Nikkei stock index finished 0.36 percent higher.

The liquid crystal display maker last week priced its initial public offering at the low end of expectations, suggesting that investors were wary about the sale, but insisted that demand was strong.

Japan Display holds a leading 16 percent in the growing $35 billion global market for smartphone and tablet screens, according to US-based research firm NPD Group.

And its IPO was one of the biggest in Tokyo since drinks giant Suntory’s food-and-beverage unit raised $3.9 billion in 2013.

However, analysts have warned it faces tough competition from lower-cost countries, including China, South Korea and Taiwan. To address this, the firm — set up in 2012 through the merger of Hitachi, Toshiba and Sony’s loss-making LCD units — is looking to boost production of small and medium-sized screens.

But Seiichi Suzuki, market analyst at Tokai Tokyo Securities, told AFP: “This is a company that was made up of units offloaded by their parent firms. (It doesn’t) have a bright future.”

He said the firm should not have “forced its listing”, citing a tough market environment with the Nikkei index down around 10 percent this year.

– ‘Extremely disappointing’ –

Japan Display had earlier said it would sell 140 million new shares at between 900 yen and 1,100 yen, while its major private shareholders would offload 213.9 million shares.

“A disaster, no doubt,” Lorne Steinberg, head of Montreal-based Lorne Steinberg Wealth Management, told Dow Jones Newswires.

“The deal must have been either badly mispriced or the investor base was misjudged. In North America, dealers routinely support IPOs, so that this type of opening performance could only happen if the entire market was also going suddenly bad at the same time.”

Chris McGuire, chief executive of Chicago-based hedge fund Phalanx Capital Management, dumped all the shares his firm had bought at the open.

“The steep price fall is extremely disappointing and shows that the deal was overpriced at issue,” he said.

Apple accounts for nearly a third of Japan Display’s revenue, but the firm also deals with other top gadget makers such as Samsung and Microsoft.

The company was formed with the aim of helping Japanese firms better compete in high-resolution display technology, which has become the standard for smartphones, tablets and other electronic devices.

The government-backed Innovation Network Corp of Japan held about a 70 percent share of the firm, with the three electronics giants each claiming a roughly 10 percent stake.

Many Japanese electronics and technology giants have struggled in recent years as they face price undercutting by foreign rivals and painful losses in some consumer product units, including televisions where profit margins are wafer-thin.

Once-mighty firms such as Sony and Panasonic have been undergoing painful restructuring after years of losses.

Sony this month said it would sell properties at a prestigious Tokyo site where it had its headquarters for six decades, as the formerly world beating firm struggles to repair its bottom line.

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