Line Corp (ADR) (NYSE:LN) Successful IPO A Major Win For Messaging Apps by Kyle Stanford, PitchBook
Japanese mobile messaging app Line debuted Thursday on the NYSE and the Tokyo Stock Exchange, opening at $42 per share in the U.S., or roughly 28% above its IPO price. The offering raised $1.15 billion, marking the largest and first $1 billion+ tech IPO since Alibaba (NYSE: BABA) raised $25 billion in its September 2014 offering.
Line itself was not VC-backed. Prior to the stock sale, the company was owned by NAVER, a South Korea-based internet content company that operates with a search portal as its core business; after the offering, NAVER will own an 83.3% stake. But the massive IPO and potential public market success—the stock closed its first day at $41.58—could build on the confidence generated by Twilio’s successful market entrance three weeks ago, and push unicorns closer to exit.
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Launched in 2011, Line been downloaded 2.2 billion times globally, offering free messaging, voice and video calling, and photo sharing—similar to WhatsApp. The service has grown to more than 218 million monthly active users, according to March data in its SEC filing (in contrast, WhatsApp passed 1 billion MAUs in February). This user base will be paramount to its future success, as the company looks to grow its revenues through mobile advertising around the world. The company’s 2015 revenues stood at almost $1.1 billion, 30.2% of which resulted from advertising.
Until somewhat recently, it seemed unthinkable that a “messaging app” could go public. Messaging was a feature, not a business. But as constant social communication through our smartphones has become intertwined with daily lives, the data that can be extracted through conversation has allowed these companies to provide advertisers information for more targeted audiences; and the apps have themselves gained features, including money transfer and purchase capabilities, making the inauspicious “messaging app” a component for efficiency for businesses and consumers.
What messaging apps or communication tools could be next for an IPO?
The top three messaging apps, according to many, are Facebook Messanger, WhatsApp and Skype, none of which are in position for an IPO, as all are owned and operated by either Facebook (NYSE: FB) or Microsoft (NASDAQ: MSFT)
The Ontario-based Kik has raised more than $120 million in funding, most recently a $50 million round that reportedly valued it at $1 billion. The service is also said to have 300 million registered users and contains features such as chatbots (what some people around Silicon Valley feel will be the next big thing in communication). Developers using the service also have the opportunity to use open-source tools integrated in Kik to create their own chatbots, which allows businesses to connect with their customers and gain data toward better monetizing their platforms. Backed by investors including Foundation Capital, Spark Capital and SV Angel, Kik was founded in 2009, first receiving institutional capital in 2011. A six-year holding period isn’t incredibly long, but with the success of Line, Kik investors could start to clamor for an exit in the not-so-distant future.
Headquartered in Singapore and founded in 2009, Garena has set out to connect people through the internet. Its first product, Garena+, is an online platform for people to meet, chat and play games. The gaming angle could be a key to the development and monetization of the company—as the digital gaming market continues huge growth worldwide—but Garena has also included ecommerce and payments technologies into its product portfolio. With Shopee (its ecommerce platform), users can browse products, share their favorites with friends, and sell products, as well as interact directly with sellers to make offers on for-sale items. With Airpay, customers can convert cash at brick-and-mortar retail shops into digital currency, which can then be used to pay for both physical and digital goods including utility bills, gaming credits and e-commerce purchases. Garena raised a $170 million funding in March at a reported $3.75 billion valuation, and is backed by Keytone Ventures and Khazanah Nasional (Kazakhstan’s sovereign wealth fund), among others.
Slack is not a messaging app like Line or Kik, and hasn’t (yet?) developed its product into different business areas like Garena, but the team communication platform has more than 2.3 million daily active users and sends more than 1.5 billion messages each month. The company has been rumored to be looking at an IPO for some time, either because of actual intention or simply because its easy fodder for those talking about unicorn IPOs (I’m guilty of this, apparently). Slack should have the runway to stay private for a while, however. The company raised a $200 million financing at a $3.8 billion valuation in April. Its backers include Accel, Andreessen Horowitz and Index Ventures, among many, many others.