The largest IPO in six years in the Japanese stock market is here! Tokyo Metro will go public tomorrow, with strong demand from overseas institutions and retail investors for new shares

On Wednesday, Tokyo Metro will be listed on the Tokyo Stock Exchange, raising a total of ¥348 billion (approximately $23 billion), making it the largest IPO in Japan in six years.

The listing has received support from over 30 securities firms and is the first major IPO following the introduction of the "Nippon Individual Savings Account" (NISA) plan by the Japanese government in January this year. The NISA plan allows investors to invest in stocks, funds, and other financial products in specific accounts, aiming to attract more people to participate in the stock market.

This IPO has attracted significant attention as it marks the first privatization of a state-owned enterprise in Japan since the IPO of JR Kyushu Railway Company in 2016 and Japan Post one year ago.

The listing of Tokyo Metro is considered an important indicator of stock demand in Japan, especially on the eve of the upcoming Lower House elections. Analysts believe that the election results may affect expectations of further rate hikes, thereby influencing market confidence in Japanese stocks.

Tokyo Metro IPO Booming, Shareholder Benefits Attractive

Tokyo Metro operates a subway service network in the world's most populous metropolis, transporting over 6.5 million passengers daily. Compared to subway systems in major global cities like New York and London, Tokyo Metro is known for its efficiency and cleanliness.

Kirk Boodry, an analyst at financial advisory firm Astris Advisory Japan, stated: "This is an attractive asset with brand recognition. The company's financial condition is generally stable with low volatility."

The IPO price of Tokyo Metro is ¥1,200, with an estimated dividend of ¥40 per share by March 2025, resulting in a yield of 3.3%.

Tokyo Metro has been attracting retail investors by offering various benefits . Starting from October, in addition to a 3.5% annual dividend, shareholders holding over 200 shares will receive a shareholder discount pass. Those holding 10,000 shares will receive a shareholder benefit coupon for an annual pass on the entire Tokyo Metro network.

Some investors have calculated that solely based on the shareholder benefit coupon, it would take around 55 years to recover all costs, while also achieving a lifetime of "Tokyo Metro freedom".

Furthermore, the company will issue various discount coupons to shareholders, such as free entry to the subway museum, free drink coupons... Hiroaki Tomori, a fund manager at Mitsubishi UFJ Asset Management, estimates that this will increase the dividend yield to 4.9%, which is very attractive.

This issuance is a key indicator of Japanese stock demand

Shingo Ide, Chief Stock Strategist at NLI Research Institute, stated that Tokyo Metro, as a stable income stock, is attractive to investors.

"This is the first large IPO in a long time. It is a well-known company (in Japan), but it may have a negative impact on other income stocks such as NTT or East Japan Railway Company." IPO analyst Kazumi Tanaka from DZH Financial Research Inc. predicts that the company's stock will start trading at around 1500 Japanese yen on Wednesday.

Some analysts believe that this issuance is a key indicator of Japanese stock demand, as Japan will have a lower house election on October 27, which may affect people's expectations of further rate hikes.

Chisa Kobayashi, Japan stock strategist at UBS SuMi TRUST Wealth Management Co., Ltd., stated:

"Large IPOs will have a positive impact on the market as they will increase attention on Japanese stocks, as we do not have many large-cap stocks available for global investors to purchase."