* IPO process kicked off with initial Tokyo application
* Listing to become either dual or US-only, sources say
* Deal likely to value company at $10 bln-$20 bln -source
(Recasts, adds debate on IPO location, company comments)
By Emi Emoto and Sophie Knight
TOKYO/SEOUL, July 16 Tokyo may struggle to get a
piece of a listing that could value Japan's social messaging
service Line Corp at up to $20 billion, with bankers saying New
York is a more likely venue as a base for global expansion to
build on explosive growth at home.
Line's parent company, Naver Corp of South
Korea, said on Wednesday that Line had kicked off its listing
process with a first application for an initial public offering
in Tokyo. The Line messaging app has been downloaded 480 million
times, with growth of 140 percent over the last year, making it
one of the world's most popular messaging services, albeit with
comparatively low exposure in the United States.
But banking sources say the listing will ultimately be
either a dual U.S.-Japan listing, or a listing only in the
United States - and the latter option matches Line's growth
ambitions. Line is keen to capture a global audience amid a land
grab among messaging apps, with WhatsApp bought by Facebook Inc
in February for $19 billion and Viber snapped up by
Japanese online retailer Rakuten Inc.
"It makes sense to list only in New York. They are a global
company and get 85 percent of their business outside of Japan,"
said one source at a foreign bank in Tokyo familiar with the
"The potential downside of a dual listing is that you split
the liquidity into two exchanges ... You also have the cost to
list in two places and to maintain listings in two places."
Another banking source with knowledge of plans said Line
would like to list in its home country, still its most lucrative
market and familiar territory to its top executives. Yet its
parent company Naver is wary of the costs of a dual listing and
favours New York's higher volume and global profile.
The banking sources requested anonymity because they are not
authorised to speak publicly on the matter.
"It has not been decided whether Line will eventually go
public, which exchange it will be listed on and when it will be
listed," Naver said in its filing. A spokeswoman for Line said
in Tokyo that it was exploring many possibilities and that
nothing had been decided yet.
Line's app recorded 14.6 billion yen ($145 million) in
revenue in January-March - a more than threefold increase on the
year. The app's full-year sales hit 34.3 billion yen last year,
becoming the highest-grossing non-game app of 2013, according to
analytics firm App Annie.
One of the banking sources told Reuters on Tuesday that Line
had applied for an IPO in Tokyo around two weeks ago, valuing
the company between 1 trillion and 2 trillion yen ($10
billion-20 billion). The source said Nomura Holdings Inc
and Morgan Stanley would manage the IPO.
The source at the foreign bank in Tokyo said Line would
likely launch the IPO in October and list in November. If the
IPO were to take place in Tokyo, its minimum value would be
between 350 billion and 700 billion yen ($3.44-6.88 billion),
based on the Tokyo Stock Exchange's requirement that at least 35
percent of a company's shares must be floated to make the first
section of the exchange.
A New York-only listing would reinforce the city's appeal as
a financial centre for new technology businesses. Alibaba Group
Holding Inc IPO-BABA.N, China's e-commerce giant, eventually
chose New York for its massive IPO. While it initially preferred
Hong Kong as the venue, it changed tack as its shareholder
structure did not pass muster with regulators there.
Yet neither Tokyo nor New York looks particularly hospitable
for a Line listing at this time, however.
Some U.S. tech shares weakened on Tuesday after Federal
Reserve Chairman Janet Yellen said in congressional testimony
that equity valuations of social media and biotechnology firms
appeared to be stretched and high relative to historical norms.
In Japan, several large IPOs this year have been hit hard
after their listing, with panel maker Japan Display Inc
, the largest so far this year, dropping nearly
one-third from its IPO price since it listed in March.
For the U.S. element of its listing, Line has yet to decide
between the New York Stock Exchange and the tech-oriented Nasdaq
exchange, one of the banking sources said. Line only has a small
presence in the United States, where the app has been downloaded
just 10 million times and is likely to use funds raised in the
IPO to expand its audience there, analysts say.
"(The IPO) would provide Line with the resources and
recognition it needs to compete in the next level of chat wars,"
said Neha Dharia, a senior analyst at technology research firm
Naver's share price dropped 3.4 percent on Wednesday while
Seoul's benchmark Kospi index closed flat.
($1 = 101.5300 Japanese Yen)
(Additional reporting by Nathan Layne in TOKYO and Se Young Lee
and Joyce Lee in SEOUL; Editing by Tony Munroe, Edwina Gibbs and