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 South Korea-based Naver said on Monday that it does not plan an
initial public offering for Line this year, dashing market
expectations for a deal that one banking source has said could value
Japan-based Line at $10 billion-$20 billion.
Hwang In-joon, Naver's CFO, also said that while Naver is open to
strategic alliances or investments for Line, there are no such
discussions ongoing and he does not consider such tie-ups to be
crucial for Line for now.
"Market conditions on their own don't look bad, but the real
question is whether now is the right time for us to step forward,"
he said. "And we ultimately decided that it's better to further
build up the business than what it is this year."
Preparations for a Line IPO continue, he said.
A banking source told Reuters in July that Line would likely list in
November. A Line IPO would be the first by a major chat app
operator.
Naver said on Monday that the operator of the Line app, first
developed to overcome downed communications in Japan after the March
2011 earthquake and tsunami, is still considering whether to seek a
listing, either in Japan, the United States, or both, but gave no
details on possible timing.
The decision to hold back on an IPO followed the record-breaking $25
billion listing by Chinese e-commerce giant Alibaba Group Holding
Ltd. A successful Alibaba IPO had been expected to help smooth the
way for an offering by Line.
The decision also led to speculation that Naver may be seeking a
strategic investment from a company, Alibaba in particular, for Line
to further bolster the company's value before an offering.
Alibaba declined to comment on Tuesday.
Hwang said he did not believe that Alibaba's massive listing had
sapped investor demand for tech shares.
"Alibaba's IPO has provided momentum for the valuation of IT stocks
right now," he said in a phone interview.
VALUATION QUEST
Line's second-quarter revenue expanded by more than half on an
annual basis, fueled by growth outside its home market, to 183.2
billion won ($176 million). That was a 26 percent increase from the
first quarter.
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Naver had 918 billion won in cash and cash equivalent at the end of
June.
"If there is a need, Line can borrow funds. Unless Line does some
extraordinarily large marketing or decides to go the M&A route, what
they have already is enough," said Korea Investment analyst Hong
Jong-gil.
Line does not break out monthly active users (MAUs), the key metric
for chat app operators, but said in late July that it had 490
million total users.
Brokerage HMC Investment & Securities estimated on July 17 that each
of Line's monthly active users would have a market value of 92,810
won ($89). It estimated that Line had 230 million monthly active
users, which would put its market value at about 21.3 trillion won.
By comparison, social media giant Facebook Inc paid $42 per monthly
active user when it bought chat service WhatsApp in February.
Line is expected eventually to raise funds to boost growth outside
Japan and compete with rivals such as WhatsApp and Tencent Holdings
Ltd's WeChat, the dominant chat app in China.
Morgan Stanley and Nomura Holdings Inc had been tapped to manage
Line's IPO, a source has said previously.
(1 US dollar = 1,039.5000 Korean won)
(Reporting by Se Young Lee; Editing by Tony Munroe and Ryan Woo)
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