Deals: Line plots $3b IPO, but may have a tough road ahead

Rumors of an IPO for Line have been rumbling on for nearly three years. What was once thought to be a US$10 billion IPO could turn out to be a US$3 billion listing, according to areport today from Reuters affiliate IFR.

Citing people close to the deal, the article says Line Corp, the Japan-based company behind the messaging app, plans an IPO of up to US$3 billion in New York and Tokyo that is expected to happen before the end of the summer.

There’s a problem. Line is now struggling to grow.

A spokesman for the social media firm, a spin-off from Korea’s Naver, said various options are being weighed up but nothing has been confirmed.

Line is thought to have suspended a planned US$10 billion listing in September 2014. Then, in April last year, the Nikkei reported that the company reapplied to the Tokyo Stock Exchange to begin the procedure.

Downer

But there’s a big problem. It’s not just the rumored valuation that’s changed in the intervening years. Line is no longer a hip, hot, and happening social network. It’s now struggling to grow.

Line added a meagre 10 million MAUs from Q1 to Q4 last year. For a global service, that’s close to disastrous. Line is adding so few new users each day that the company could invite them all to a daily party at a football stadium.

In the meantime, Facebook has been whipping Line with WhatsApp. WhatsApp has doubled its MAUs in the past two years.

Despite all that, Line pulled in more than US$1 billion in revenue in 2015 and remains – for the third year in a row – the world’s top-earning app publisher thanks to cash from social gaming and an array of other services.

Line became more and more dependent on its four main markets (Japan, Taiwan, Thailand, and Indonesia) in 2015. That means the social network is not finding new audiences in larger nations where smartphones are booming, such as India or Brazil. Line is blocked in China, but it had already been trounced by WeChat when that happened.

With Line facing serious stagnation issues and earlier this week giving up on its much vaunted online mall for the Japanese market, the timing for an IPO looks even worse than in 2014 or 2015, when Line was believed to be waiting for better conditions.

In addition to all that, tech stocks are once again getting flogged on the markets. Don’t hold your breath, even for a much-discounted Line IPO.