Japan’s Hottest Tech IPO in 5 Years Shows Retail Trading Fever

(Bloomberg) -- A little known company specialized in artificial intelligence has gained more than sevenfold since its listing in Japan last month, underscoring the insatiable demand for technology stocks from the country’s retail investors.

Neural Pocket Inc., which analyzes photos and videos using AI, gained 622% in its first eight trading days through Aug. 31, the most among tech listings in Japan since 2015, according to Bloomberg-compiled data. The stock has extended its gain since then to a current valuation of over $1 billion. Neural Pocket’s eight-day gain beat out that of Ficha Inc., a developer of image recognition software that went public in June, by just a few basis points.

Neural Pocket’s surge was supported by amateur investors who have become more active in Japan’s stock market as they work from home during the coronavirus pandemic, according to Tomoichiro Kubota, a senior market analyst at Matsui Securities Co.

“This stock is getting hugely popular among retail investors,” Kubota said. “Because their business has to do with AI engineering, there are some high expectations over growth.”

The Tokyo Stock Exchange Mothers Index, which hosts many tech start-up listings, has soared throughout the outbreak, more than doubling from its March low. The nation’s individuals opened more than 820,000 online brokerage accounts between February and April, more than double that in the same period in 2019.

Neural Pocket’s stock price doesn’t reflect its fundamentals, according to Kubota. The company posted an operating loss of 133 million yen ($1.3 million) in 2019 on total revenue of 311 million yen. It expects an operating profit of 165 million yen this year with sales more than doubling.

Kubota said that while Neural Pocket’s lofty stock prices could be maintained in the short term, “it seems pretty unlikely for this kind of move to be sustained two to three years down the road, looking at the firm’s fundamentals.”

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