Bain Capital-led Kioxia Delays USD 3.2 Billion IPO

The prominent flash chip manufacturer Kioxia shelved its plan to go public which was expected to be the biggest Japanese initial public offering (IPO) in the year 2020. In the press release, the company said that it will further continue to “evaluate an appropriate timing for its offering.”

Kioxia said that it has postponed its IPO plans owing to the potential second wave of coronavirus that can affect the global market. Along with this, it implies that the U.S.-China trade war is one of the biggest reasons for the delay. The chip manufacturer said earlier this month that its IPO would raise around USD 2.9 Billion. If everything would have gone well, tt was planning to offer USD 3.2 Billion in shares. For the IPO, nine underwriters have been selected which includes Morgan Stanley, Goldman Sachs, JP Morgan, Nomura, and Mitsubishi UFJ.

Kioxia, previously known as Toshiba Memory, was rebranded by Bain Capital, a U.S.-based private equity firm. The equity firm had bought Toshiba’s memory card business unit in a USD 18 Billion deal. Toshiba Corporation was looking forward to reducing its stake to 32% from 40% in Kioxia. However, after the news of postponement came out, its shares fell as much as 8.6% in Tokyo trading, Reuters reported. Toshiba said that it was disappointed by Kioxia’s decision.

“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 of continued market volatility and ongoing concerns about a second wave of the pandemic”, said Nobuo Hayasaka, President and Chief Executive Officer (CEO) of Kioxia in the press release. “As a company, we make disciplined decisions that are in the best interest of all our stakeholders and we will revisit an IPO at an appropriate time. We are not in a rush,” he added.

The global memory chip market is facing market volatility owing to the impact of tighter U.S. restrictions on Huawei Technologies Co Ltd, a China-based tech company. This has disallowed the global suppliers to sell their chips produced by using U.S. technology to Chinese companies. Kioxia had warned that these restrictions can lead to memory chip oversupply and plummet the market prices. Bain Capital had planned to list Kioxia last year but had delayed due to sliding market conditions. Even though the market seems unstable, analysts predict that the market would witness a strong demand due to the increase in the cloud service providers and the Internet of Things (IoT).

Toshiba Corporation sold Toshiba Memory to the Bain Capital-led consortium which included Apple, Dell Technologies, and SK Hynix. The world’s second-largest NAND flash memory manufacturer sold its business after its U.S. nuclear unit Westinghouse filed for bankruptcy. Kioxia reported a loss of approximately USD 1.64 Billion in March while a year ago it reported a profit of approximately USD 440 Million. According to the reports, Bain Capital will reduce its stake from 56.2% to 47.8% after the company’s IPO debut.