Kioxia Goes Public in Tokyo, Raising Funds for AI Push

Japan's Kioxia Holdings made its debut on the Tokyo Stock Exchange on Wednesday, marking a significant milestone for the company and its investor consortium, reports Nikkei Asia. The flash memory manufacturer, formerly part of Toshiba, commenced trading at 1,440 yen, slightly below its initial public offering (IPO) price, before rising to 1,504 yen, representing a 4% premium.

The IPO signifies a new chapter for Kioxia, which was acquired by a consortium led by Bain Capital in a landmark $18 billion deal in 2018. This transaction, the largest private equity deal in Asia at the time, reshaped the company's ownership structure and trajectory.

Prior to the IPO, Kioxia announced a substantial investment of 729 billion yen ($4.8 billion) to expand its production of advanced 218-layer NAND flash memory. The IPO is part of the funding strategy for this project, alongside credit lines from Japanese banks and government subsidies. This investment is being undertaken in partnership with Kioxia's US partner, Western Digital.

The public offering valued Kioxia at 784 billion yen ($5.1 billion), based on the IPO price of 1,445 yen. Kioxia claims its 218-layer NAND flash memory offers superior storage capacity compared to competitors. The company is also actively developing next-generation products with higher capacity, faster data transfer speeds, and lower energy consumption, characteristics highly desirable for data centers.

Bain Capital's ongoing efforts to establish Kioxia as a leading force in the memory sector continue, although progress has been somewhat impeded by a slump in the memory market that began in late 2022. This downturn resulted in five consecutive quarters of losses for Kioxia, culminating in December 2023, and slowed investment throughout this period. As a result, Kioxia slipped to third place in the global flash memory market behind Samsung Electronics and SK Hynix.

Bain Capital's initial plan to take Kioxia public within three years following the acquisition was disrupted by US export restrictions on Huawei Technologies, a key Kioxia customer. This forced a revision of Kioxia's business plan, delaying the IPO.

Following the IPO, the Bain-led consortium's ownership in Kioxia has been reduced to 52% from 56%, while Toshiba's stake has been trimmed to 32% from 41%.

Unlike the relatively consolidated DRAM market, the flash memory sector is characterized by greater competition and ongoing discussions about industry consolidation. Kioxia had previously explored a merger with Western Digital's flash memory business, but this plan was abandoned due to opposition from SK Hynix, a Kioxia competitor and key member of the consortium. SK Hynix holds convertible debt in Kioxia that could potentially grant it a 14% equity stake, although its voting rights are currently limited until 2028.