Reuters reports that Kioxia has canceled its planned initial public offering (IPO), which is slated for October. According to three Reuters sources familiar with the matter, this decision was driven by recent unfavorable market trends in the semiconductor sector, which have impacted its ability to meet valuation targets.
Bain Capital, Kioxia's principal investor, had hoped that the valuation of the 3D NAND maker would be 1.5 trillion yen ($10.39 billion). However, a significant drop in stock prices of its competitors, such as Micron, Samsung, and SK hynix, has made this goal challenging. These companies have seen their shares fall by roughly a third from recent highs, reflecting general challenges in the semiconductor industry and uncertainties with the memory market.
Kioxia, the world's third-largest supplier of NAND flash memory, has been recovering from a downturn in the memory chip market, benefiting from higher average selling prices. Despite this, the overall market environment remains volatile. Besides, although Kioxia has strong financials, its $10.3 billion valuation is expected to be lower than that of competitors like Samsung and Western Digital. This lower valuation is due to Kioxia's market position, which is influenced by its production cuts, debt levels, and the need to offer appealing prices to attract domestic and international investors. That said, it is unlikely that Bain Capital is inclined to sell a stake in Kioxia just now.
The company has faced IPO delays before. In 2020, Kioxia postponed an IPO due to global uncertainty in the semiconductor industry stemming from the COVID-19 pandemic and geopolitical tensions between the U.S. and China. Additionally, merger discussions with Western Digital fell through last year due to opposition from SK hynix.
Currently, a special-purpose entity formed by Bain Capital and SK hynix holds a 56% ownership stake in Kioxia, with SK hynix having the option to control up to 15%. Toshiba maintains a 41% share in the company. After Kioxia went public, Bain and Toshiba planned to decrease their ownership stakes gradually.
Kioxia's IPO comes as its partner Western Digital is splitting into two companies: one focused on NAND and SSD production and the other on hard drives. Following this split, Western Digital's NAND business will hold around 12% of the global NAND memory market, matching Kioxia's share at around 12%. However, both companies will trail behind industry leaders Samsung and SK hynix.
