TOKYO -- When government-owned Japan Post Holdings and its two financial units go public simultaneously on the Tokyo Stock Exchange in November, it will be one of the biggest IPOs ever, with the companies having a combined market capitalization of more than 10 trillion yen ($79.7 billion).
The three companies plan to raise a total of around 1.5 trillion yen through first-round offerings when they go public, according to the managing underwriters.
It will be the first debut of a "giant whale" since the 1987 listing of Nippon Telegraph and Telephone, then a state-owned enterprise, and the event is already making waves on the stock market. But pundits wonder if the holding company and the two units -- Japan Post Bank and Japan Post Insurance -- can map out growth strategies that can meet investor expectations amid the nation's dwindling population.
The result of the coming listing is likely to affect the fate of Prime Minister Shinzo Abe's economic policy mix, or Abenomics, which lays much weight on stock prices.
On Aug. 14, a midsize brokerage house received a telephone call from a Finance Ministry official asking it to sell shares of the three postal companies.
The ministry has picked 11 domestic and foreign securities companies, including Nomura Securities and Goldman Sachs Japan, as lead managers of the postal companies' initial public offerings.
In addition to the big underwriting syndicate, the ministry has formed an "All Japan" sales system of around 90 companies, including regional and online brokerages, to support the postal IPO.
The Aug. 14 call was part of the ministry's efforts to set up the extensive sales system that reflects the government's intention of making postal shares widely available to the public.
The three postal companies may eventually have a total of around 1 million shareholders, twice as many as Toyota Motor, through the IPO. The projected market capitalization of 10 trillion yen, larger than those of the SoftBank Group and Japan Tobacco, will exert a great deal of impact on the stock market.
The November IPO is expected to attract a huge number of individual investors. Thanks to the postal group's excellent name recognition, securities companies have been flooded with inquiries about the IPO from individuals.
The holding company plans to allocate more than 50% of net profit to dividend payments, compared with 20% to 30% for megabanks. The three postal companies are expected to attract investors "as stable dividend stocks in place of electric power companies," said an official at a Japanese securities house.
In contrast with growing expectations on the stock market, preparing for the listing is like groping in the dark.
Since the three postal companies submitted their formal listing applications in June, Taizo Nishimuro, president of Japan Post Holdings, has frequently visited Japan Exchange Group to answer questions such as whether shareholders will be adversely affected as a result of conflicting interests among the three companies and whether the three have established watertight corporate governance systems. The frequency of meetings is especially noticeable, as the CEO of an applicant usually meets officials of the Tokyo bourse operator only once for screening purposes.
In addition to the huge scale of the IPO, the coming listing involves other unusual factors, including the simultaneous listing of the holding company and its two subsidiaries, for which there is no precedent.
If shareholders in the subsidiaries incur losses as a result of the parent firm's intention, the postal group may lose market trust. The TSE has grown nervous, hoping to avoid such a consequence.
Offering prices are still not in sight, despite repeated discussions among the lead managers.
The government plans to allocate 4 trillion yen of the proceeds from the sale of shares in the holding company to finance reconstruction of areas damaged by the March 2011 earthquake and tsunami. As the government will hold more than a third of the shares in the holding company after the listing, it wants a market value of at least 6 trillion yen.
But as postal shares will be sold on three occasions or so, a ministry official said selling prices should not be so high that they cause an "allergy to Japan Post" among investors.
Lead managers are therefore racking their brains to figure out an appropriate price level. A key issue is the "unreadable political situation," an executive at a lead underwriter said. "Given the huge fundraising amount, an unsuccessful IPO should cause a social uproar beyond comparison with the mess over the new national stadium" for the 2020 Tokyo Olympics.
In contrast with individual investors, institutional investors are in a dilemma. While they cannot brush aside the postal group because of its huge presence, they will have to sell shares in the same business category in order to buy postal shares with limited amounts of available capital. They wonder whether postal shares are in the "financial" category or in the "logistics" sector due to Japan Post's leading role in the group.
But investors, such as Aberdeen Asset Management of Britain, point out that they cannot see what the postal group will be doing a decade later.
An important but unseen issue is the ratio of allocating postal shares to domestic and overseas markets. While 80% of them are likely to be sold in Japan at present, foreign brokerages are urging a higher ratio of overseas sales.
Coordination to set offering prices and an allocation ratio of domestic and overseas sales is expected to continue until the approval of the three postal firms' applications slated for September.
But the November listing of the three companies is just the start of their future. If the debut is their only goal, the IPO of 10 trillion yen could bring nothing but confusion to the market.
The privatization of state-owned enterprises in Japan, which got fully underway with the listing of NTT and Japanese National Railways in the 1980s, will enter its final stage through the three postal companies' debut on the Tokyo bourse.
The postal group has assets of nearly 300 trillion yen on a consolidated basis. It has a nationwide network of 24,000 post offices, much larger than the biggest convenience store chain with around 17,700 outlets operated by Seven-Eleven Japan.
The presence of the group is especially large in the financial sector, as 13% of personal financial assets, totaling 1,700 trillion yen, are under its management -- 178 trillion yen in deposits at Japan Post Bank and 44 trillion yen in Japan Post Insurance's insurance in force.
In 2014, 77 companies went public, raising a total of 980 billion yen through IPOs. The three postal companies alone are expected to offer shares totaling more than 1 trillion yen.
Privatization of state-owned enterprises in Japan has been slow, compared with other countries. For example, Deutsche Post listed in 2000.
The 15-year delay in the listing of the three postal companies is a testimony to slow progress in structural reforms in Japan.