Japan networking site stock soars 45 pct in debut

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By Sachi Izumi

TOKYO, Dec 17 (Reuters) - Shares in Japanese social networking site operator Gree Inc (3632.T)soared 45 percent in their debut on the Tokyo bourse on Wednesday, becoming a rare bright spot in this year's lacklustre IPO market.

The global financial and economic crisis has all but put the brakes on a slow Japan IPO market, with the number of debuts and proceeds raised so far this year sliding to 16-year lows, according to Thomson Reuters data.

But Gree, which competes with the likes of Mixi Inc (2121.T) and DeNA Co (2432.T), has attracted attention with its $150 million IPO and growth potential.

Gree's debut was Japan's second-biggest this year after Seven Bank's (8410.Q) public offering in February, and the SNS provider, currently valued at 107 billion yen ($1.2 billion), has overtaken Mixi as the most valuable firm on the Tokyo Stock Exchange's Mothers market for start-ups.

"When Mixi made its debut (in 2006), people wondered why Gree did not do the same," said Ichiyoshi Securities IPO analyst Katsumi Udagawa said. "Gree has more growth potential than Mixi."

"This looks like it may act as a spark for the IPO and small-cap markets toward the year-end," he added.

The four-year-old firm grew out of president Yoshikazu Tanaka's part-time hobby and has expanded to 7 million users.

Gree expects its operating profit to increase more than five times to 5.9 billion yen in the year to June, bigger than Mixi's projected 3.8 billion yen profit in the year to March.

Although Mixi has more than 15 million users, it relies mainly on advertising for its revenue while Gree has more fee-based services like its sales of popular avatars used in games.

The networking site first started as a PC service but now earns most of its revenue from its mobile service after it tied with KDDI Corp (9433.T), Japan's No. 2 wireless carrier. KDDI holds a 7.6 percent stake in Gree.

Gree shares first traded on the Mothers market at 5,000 yen, 52 percent higher than the IPO price of 3,300 yen. They pared gains to end the day at 4,800 yen, up 45 percent. The Mothers index .MTHR was down 1 percent.

Gree issued 1.2 million new shares and sold 2.83 million existing shares, raising a total of 13.3 billion yen ($150 million).

Nomura Securities was the lead manager of the deal.