Tokyo Stock Exchange Is Set for One of Its Biggest IPOs of the Year

23 Dec 2020, 09:16 AM IST

(Bloomberg) -- Japanese robo-advisor WealthNavi Inc. debuted on the Tokyo Stock Exchange Tuesday in one of the biggest initial public offerings on the bourse this year.

The wealth management platform ended its first trading session 68% higher than its IPO price of 1,150 yen. The firm raised 17.9 billion yen ($173 million). With a market value of 52 billion yen, it is among the largest of the nearly 100 listings in Tokyo in 2020, despite being just five years old.

The stellar first-day pop followed a slew of well-performing debuts in Asia and the U.S. in recent weeks as investors rushed in to load up on some of the high-flying tech names. Home-rental platform Airbnb Inc. closed 113% above its IPO price in its debut earlier this month. JD Health International Inc. surged 56% while DoorDash Inc. soared 86% on their first day of trading. The whopping gains in the U.S. debuts even stoked debate on IPO pricing.

WealthNavi is banking on providing an inexpensive asset management platform with a low barrier of entry in a market where retail investment is growing. Authorities have been promoting personal investment to make up for feared shortfalls in pension funds, with vast numbers of the population set to retire over the coming decades.

WealthNavi has about 320 billion yen under management and 350,000 accounts as of Dec. 7. The firm offers a simple approach to investing: by answering six questions related to income and risk appetite, the platform generates a portfolio in one of five different risk levels, allocating money into a combination of exchange-traded funds.

Financial Disparity

The firm was founded in 2015 by Kazuhisa Shibayama, a former finance ministry official who later worked at McKinsey & Company. Shibayama was struck by what he called the “financial disparity” between his relatives in Japan and the U.S.

During a holiday with his wife’s American parents, Shibayama was asked by his mother-in-law to check the assets they had tasked a private bank with managing. He found they had several millions of dollars in assets, largely ETFs, while his own parents in Japan had left much of their assets in cash deposits.

“I thought my family was well off,” he wrote on the company’s website, “but there was a 10-fold difference between their assets and my in-laws’.”

The analogy is typical of investments in the two countries. A regular survey by the Bank of Japan found that cash and deposits made up more than half of household assets in Japan, with less than 10% invested in stocks. In the U.S. almost 33% of assets were in equities.

But WealthNavi is debuting at a time when amateur investment in Japan is heating up. Online brokerage accounts have surged in 2020, while retail investors made up an average of 21% of total trading value on the Tokyo Stock Exchange in the past six months, versus just 16% the year earlier.

WealthNavi “has benefited from the equity market rally from 2017 and onwards,” said Shin Tamura a Bloomberg Intelligence analyst, who cautions that such favorable conditions may not last. “It hasn’t fully experienced a bear market. Robo-advisors are not perfect, and there may be clients who don’t fully understand that.”