Kioxia IPO: $30 Billion Company and No Prospectus In English. Really?

15 September, 2020

Memory chipmaker Kioxia is expected to complete IPO and begin trading in the beginning of October. It is strange that such a large company did not publish an IPO presentation and prospectus in English.

Kioxia is offering 21.6 million new shares and will raise a total of about $800 mil (at the estimated offer price of JPY 3,900) while existing shareholders will sell 74 million shares (including overallotment option). Toshiba will receive approximately $1.4 bil in proceeds (if overallotment option will be exercised) and will remain with a 32% shareholding in Kioxia valued at $6.3 bil.

At the estimated offer price mentioned above, Toshiba’s stake could be valued at $7.7 bil, which is 61% of Toshiba’s current market capitalization and 53% of its Enterprise Value. Needless to say, if shares of Kioxia will perform well post IPO, the revaluation of Toshiba arising as a result of the recognition by market participants of Kioxia value is almost guaranteed.

As for the valuation, Kioxia will have a market cap of $19.8 bil, net debt (estimated) of approximately $9.8 bil and an Enterprise Value of $29.6 bil. According to IPO prospectus in Japanese, in Q1 FY 21 Kioxia had an EBITDA of $1.1 bil and taking this figure, on an annualized basis Kioxia would be valued at an EV/EBITDA valuation multiple of x6.7. Micron Technology, for example is currently valued at an EV/EBITDA multiple of x5.6 (based on similarly estimated annualized last quarter EBITDA).

We would not jump into Kioxia immediately, but its IPO is certainly a positive story for Toshiba, which will be able to return part of proceeds to shareholders while giving market participants opportunity to revalue it by giving a full credit to its Kioxia stake.