Economy

Tensions between the US and China halted Kioxia’s $ 3.2 billion initial public offering

Kioxia Holdings, the chip unit that Bain Capital bought in 2018 and owned 40 percent by Toshiba, has postponed the release of the The largest initial public offering The year as tensions between Washington and Beijing caused shock waves in the global tech sector.

Kioxia, the world’s second largest manufacturer of NAND flash memory chips, was due to reveal its $ 3.2 billion listing price on Monday. Instead, it made a last-minute decision to suspend it for the time being, which led to a sell-off in Toshiba shares, which fell briefly by 8.6 per cent.

The planned IPO was on track to be the largest in Japan for 2020, and mark the culmination of one of the country’s most struggling corporate stories in recent years.

But the escalating dispute over technology between the United States and China has reduced investor demand and increased uncertainty, forcing the company to rethink its plans, according to two people with direct knowledge of the matter.

In a statement, Kioxia CEO Nobuo Hayasaka blamed the delay on “continued market volatility and persistent concerns about the second wave of the epidemic.”

We will review the IPO in due course. “We’re not in a hurry,” said Hayasaka on Monday.

The decision comes after the implementation of the US government Penalties Against the international semiconductor manufacturer, the largest chip maker in China, after cutting Huawei Chip suppliers.

Two other people familiar with the preparations for the IPO said the past few weeks have raised growing doubts about the strength of the US private equity group Bain that He led the acquisition Toshiba Kioxia, will be able to price the offer.

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Last month, Toshiba shares plunged 15 percent due to concerns surrounding US sanctions against Chinese tech groups and their potential impact on both the memory chip business in general and on the Kioxia IPO in particular.

The tight US restrictions on Huawei are already affecting most or all of the sales of Kioxia chips for the Chinese telecom group, and China is one of its primary markets, generating 20 percent of its annual revenue. In its listing documents, Kioxia warned investors that deepening the dispute between the US and China would have a “serious impact” on its earnings.

In hypothetical roadshows, institutional investors outside of Japan have already voiced their concerns about the gloomy geopolitical clouds on the chip industry. The mixed response pushed Kioxia to announce on September 17 for an indicative price range of 2,800 yen ($ 26) to 3,500 yen a share – less than the 3,960 yen that Pine had originally hoped for.

At the top of the range, the company was expected to raise 334.3 billion yen in shares with a market value of 1.89 trillion yen.

However, people close to Bain said the US private equity group had played down geopolitical concerns and, as of last week, remained optimistic that the initial public offering (IPO) would be priced at the higher end of its range.

Potential investors who have discussed the IPO with Kioxia’s insurers said they understood the book was only covered at the bottom of its range, and shares in Toshiba had already declined sharply in anticipation of a weak listing. The Japanese industrial group said it will return the majority of its proceeds from the Kioxia IPO to its shareholders.

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In 2017, Toshiba was pushed to the brink of financial collapse due to the failure of its US nuclear business, having previously suffered heavy damage to its reputation from an accounting scandal.

In an effort to shore up its finances, Toshiba has chosen to sell its memory chip business – the only part of the group that investors have seen offer exciting long-term growth prospects.

Despite efforts by the government in Tokyo to assemble an “All Japan” consortium to buy Toshiba Memory, the company was sold to a consortium led by Bain for $ 18 billion in 2018.

Thelma Binder

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