TOKYO - Japan's Line Corp, creator of the fast-growing social messaging app Line, may choose an overseas exchange for an expected initial public offering (IPO) next year, banking sources with knowledge of the matter said, within months of a high-profile listing by Twitter.
One of the sources, who spoke on condition of anonymity, said the offering could value Line, a subsidiary of South Korea's Naver Corp, at around US$10 billion.
The Line app was developed by employees at Naver's Japanese subsidiary who were forced to turn to the Internet to contact each other after the massive earthquake and tsunami in March 2011 that disrupted phone lines across the country.
Line is considering listing its shares either in Tokyo or in New York or Hong Kong, the sources told Reuters yesterday, adding that a dual listing was also a possibility.
Listing overseas is seen as offering better access to venture capital and as a way to boost its global name recognition, the sources said.
"They need to be compared with global competitors such as Facebook and Twitter, not small domestic companies," said one of the sources, explaining the merit of listing outside Japan. "It is getting saturated here in Japan, so they must be thinking of going abroad."
An offering from Line, with 270 million users of which 80 per cent are outside Japan, would follow a high-profile IPO by competing social network Twitter, which is preparing for an IPO by the end of the year that values it at US$11 billion. China's biggest online retailer Alibaba is also weighing where to list its shares.
The Nikkei business daily reported yesterday that Line would raise 800 billion yen (S$10 billion) to one trillion yen on the Tokyo Stock Exchange.
Line CEO Akira Morikawa had told Reuters last month that an IPO was being viewed as an option to expand the business but that nothing concrete had been decided. The company echoed that sentiment in a statement responding to the Nikkei report. Naver Corp told Reuters that it was open to possibilities but was not discussing an IPO at present. Naver will have the final say on an IPO.
Line, which makes the bulk of its sales from online games and oversized emoticons, or "stickers", made 12.8 billion yen in revenue in the April-to-June quarter, more than four times the previous year and up 45.3 per cent on the previous quarter.
While Line does not disclose its profit or loss figures, one of the banking sources said one analyst estimate puts the company's annual net profit at US$200 million in 2015. Applying a price-to-earnings ratio of 50 to that projection would justify valuing the entire company at US$10 billion, the source said.
Mr Morikawa has said he aims to make the social messaging service, which also offers free SMS, voice calls and games, the world's biggest communication platform. That would put it in competition with Facebook, which has more than 1.1 billion registered users, and Twitter, which says it has 230 million active users.
Line has grown rapidly since its inception in June 2011 and now competes with US smartphone app WhatsApp for market share in countries such as Spain, where it has 15 million users, and Thailand, where it claims 18 million.