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Everything Investors Need to Know About LINE, the Biggest Tech IPO of 2016

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2016 has been a rough year for the IPO market thus far, but the upcoming initial public offering of Japanese messaging-app maker LINE could be the one that comes to the rescue. LINE will debut on the market via a dual listing in Tokyo and New York on July 14 and 15.

Just this week, LINE raised its price range for the IPO to $28.50-$32.50 from its original $26.50-$31.50 level. The company plans on offering 13 million shares in Japan and 22 million share in New York, meaning that it could raise up to $1.3 billion at a $6.5 billion valuation.

In a sluggish IPO market, an offering as big as what LINE is preparing for should spark the interest of many investors. However, the application isn’t exactly popular in North America, and as is the case with many foreign companies going public, investors in the United States may not be entirely familiar with LINE.

This IPO is right around the corner and interested investors need to get familiar with LINE soon. With that in mind, today we’ve compiled everything you need to know about LINE before it goes public in the next few weeks.

The Application

At its core, LINE is a relatively simple messaging app that allows users to share texts, images, audio, and video on their smartphones and other compatible devices. Voice calls and video conferences can also be conducted on LINE. In recent years, LINE has also added other features like downloadable games, music streaming, and taxi hailing.

The basic functions of the app are all free. The company generates revenue from paid-for extras and games, as well as advertisements. One of LINE’s biggest moneymakers is its sticker store. Users can purchase special digital “stickers” that are then saved to their library and can be shared with or gifted to friends.

History of LINE

LINE was launched in 2011 by its developer, Korean search giant Naver Corporation. Within its first year and a half, the application had 100 million users and it continued to grow quite rapidly from there. Right now, the application has about 218 million active user accounts.

LINE is primarily used in Asia. It remains incredibly popular in Japan, Thailand, Indonesia, Taiwan, and India. Although LINE does not have a large presence in Europe, it does have a solid user base in Spain that it is continuing to increase.

Interestingly enough, LINE has not yet focused much on breaking into new markets. Instead, the company is looking to continue growing within its existing strongholds. However, as user growth and sales growth have started to slow recently, LINE has shifted its primary focus to generating profits, and operating income was positive in the first quarter of 2016.

Challenges

The primary challenge for LINE going forward will be its competitors in the instant messaging world.  While LINE certainly has dedicated users, it is dwarfed in size by Tencent’s (TCEHY - Free Report) WeChat with 760 million monthly active users and Facebook’s WhatsApp and Messenger, which have a combined 2 billion MAUs.

Up against these giants, LINE doesn’t really stand a chance. The good news is, however, that the company appears to know this. In fact, its recent ventures into taxi hailing and music streaming are part of a larger effort to transform LINE into a “life and entertainment platform” as former CEO Akira Morikkawa once described.

LINE’s current CEO, Takeshi Idezawa, also recognized the need for a strategy change when he took over the company in April, saying, “In the rapidly changing industry, a door for growth won’t remain open for a long time.”

Besides competition from other similar products, LINE has also been restricted by some governments. LINE is forced to offer a censored version of the app in China, where certain topics are off the table, and the company issued an apology in Indonesia when one of its stickers was accused of referencing homosexuality by the government.

Bottom Line

There hasn’t been much to talk about in the IPO market so far this year, which makes LINE’s offering even more exciting. If it is able to sell all of its planned shares, the company will easily be the biggest tech IPO of 2016 to this point, and it could spark new interest in the IPO market for the remainder of the year.

Even without the lack of IPOs looming over LINE, investors should be interested in a company of its size and with its vision. LINE seems to know right where it is and where it wants to go, and it will be interesting to see if the company can get there soon.

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