Tokyo Metro shares surged 45% on their debut trading day following Japan’s largest initial public offering (IPO) in six years. The subway operator raised 348.6 billion yen ($2.3 billion) in its highly anticipated IPO, with shares priced at the upper end of the range between 1,100 yen and 1,200 yen.
Tokyo Metro is a dominant player in Japan’s subway sector and the largest operator in Tokyo. The company, which was jointly owned by the Japanese national government (53.4%) and the Tokyo metropolitan government (46.6%), became a strong market contender after the IPO.
The offering attracted significant investor demand, with Reuters reporting that the IPO was oversubscribed more than 15 times. The retail investor portion, which accounted for nearly 80% of the total offering, was oversubscribed approximately 10 times. Meanwhile, the allocation for domestic institutional investors (1.5%) and foreign institutional investors (20%) saw even higher demand, oversubscribed by over 20 and 30 times, respectively.
Positive Market Reception
Jesper Koll, expert director at Monex Group in Tokyo, explained that the IPO’s success can be attributed to Tokyo Metro’s strong financial performance. “The company is a cash cow,” Koll said, describing Tokyo Metro as a high-dividend, stable cash flow generator with minimal operational risks. “Whether you’re Mr. Watanabe [retail investor] or a global institutional investor, this is a great share to own,” he added.
Koll also highlighted the company’s stable dividend outlook, noting that it could experience slight growth. Tokyo Metro benefits from continued strong demand for its subway services, driven by Tokyo’s expanding population, which grows by nearly 1% annually.
Mio Kato, founder of LightStream Research, shared a similarly optimistic view. He told CNBC’s “Street Signs Asia” last week that the stock was priced “relatively cheaply,” calling it “a big banner IPO for the year.”
Market Momentum in Japan
The Tokyo Metro IPO comes amid a strong year for Japanese stocks. The Nikkei 225, Japan’s benchmark index, reached new all-time highs in 2024, delivering year-to-date gains of 16.41%. In 2023, Japan was Asia’s best-performing market, with stocks rising over 28%.
Tokyo Metro’s stellar market debut underscores the continued strength of Japan’s stock market and the company’s position as a valuable asset for investors seeking stable returns.
