Japan Mixi at double IPO price on 1st day of trade
Fri Sep 15, 2006 4:48 AM ET
By Edwina Gibbs
TOKYO, Sept 15 (Reuters) - Shares in Mixi Inc. <2121.T> Japan's most popular online community, ended at double their IPO price on their first day of trade on Friday, with investors saying demand for stock could remain high despite fears it was overvalued.
Japan's second-most-visited site after Yahoo Japan <4689.T> finished at 3.12 million yen, just shy of the level bids had indicated a day earlier on its bourse debut when buy orders swamped sell orders and no shares were traded.
At 3.12 million yen a share, Mixi is valued at 222 billion yen ($1.9 billion), making a dollar billionaire out of its 30-year-old founder and president Kenji Kasahara, who holds 64 percent of the firm he started as a job-seeking site by himself while at university a decade ago.
By comparison, News Corp. <NWS.N> purchased MySpace.com, a similar U.S. site, for an estimated $580 million, and some analysts and investors warn that Mixi is far overpriced.
"In terms of fundamentals, the stock price doesn't seem to be justified but in terms of demand, nobody seems willing to sell yet because it appears as if there are investors who want to buy," said Masaki Iso, chief investment officer at Yasuda Asset Management.
At Friday's closing price, Mixi is valued at 209 times its forecast earnings per share for the year to March.
By comparison, Yahoo Japan Inc. has a price-earnings ratio of around 40, and online shopping mall operator Rakuten Inc. <4755.Q> a ratio of 25.
Mixi looks expensive even when compared with faster-growing Internet firms such as Drecom Co. <3793.T>, a developer of blog systems that has a price-earnings ratio of 135. Drecom rallied sharply in its debut on the Mothers market for start-ups in February but has tumbled since then.
Mixi's strong debut on the Mothers market could help revive sentiment towards start-ups. Many investors are still licking their wounds after allegations of securities violations involving Web portal Livedoor Co. broke in January, sending the Mothers market down by some 50 percent.
Market participants say the stock, like Internet and telecoms group Softbank Corp <9984.T> and Yahoo Japan, could become a favourite of retail investors, making it vulnerable to volatile moves.
Retail investors account for around 30 percent of trade in the Tokyo stock market.
Although Mixi's stock ended high, it was a rollercoaster ride for much of the day. It first traded at 2.95 million yen and at one point fell as low as 2.56 million yen.
Some said that the weaker sentiment during the day was in part a reflection of a Tokyo Stock Exchange rule for stocks that do not trade on their debut, stipulating that transactions on the next day of trade be paid for on that day.
That restriction will be lifted on Monday.
"I think it may go higher next week. It's just a popular stock," said Junichi Misawa, a fund manager at STB Asset Management. "But whether its worth 3 million yen or 4 million yen, nobody really knows and its going to be a while before this stock settles down."
Mixi's users have quintupled since August of last year, with 5.7 million people using it to chat, post blogs and create message boards to communicate with people who share similar interests.
It raised $93 million in its initial public offering, and Kasahara said he wants to use the funds to keep the company's competitive edge.
For the business year to next March, Mixi expects its net profit to jump 71 percent to 986 million yen with sales rising 2.5 times to 4.8 billion yen. ($1=117.52 Yen)
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