BREAKINGVIEWS-SoftBank's Wartime Bet On PayPay IPO Is Shrewd

By Hudson Lockett

HONG KONG, March 12 (Reuters Breakingviews) - Sometimes victory is just getting out the door. That’s the case for SoftBank Group-backed 9984.T PayPay, which on Wednesday priced its U.S. initial public offering at $16 per share, markedly below a target range of $17 to $20. Set against the backdrop of a globally disruptive war in the Middle East with no clear end, however, the decision to press ahead with listing the Japanese payments group is sensible.

The IPO raised $880 billion at a valuation of $10.7 billion, well short of SoftBank founder Masayoshi Son’s earlier ambition of up to $20 billion. That was always a moonshot and would have required valuing the e-payments and credit card provider at 8.4 times its sales for the 2026 fiscal year based on its annualised result for the first nine months, or five times the multiple carried by American peer PayPal PYPL.O. But even if the company's grand plans to build a one-stop financial superapp in the $4 trillion economy look daunting, prospects for the core business look robust thanks to its home market's belated but speedy uptake of electronic payments.

Japan’s economic and geopolitical position also help explain why the deal could go ahead despite the U.S. and Israel launching a war against Iran. The Asian country has about 250 days of oil reserves to help ward off pain at the pump for consumers who use PayPay’s services. The listing was also already overdue, having seen one big delay in November when its regulatory review stalled due to a U.S. government shutdown. Then its roadshow, originally slated to launch on March 2, got pushed back as the onset of war rattled markets. Waiting for calmer trade might have cost PayPay more, however.

Qatar Investment Authority and Abu Dhabi Investment Authority were among investors who pledged more than $200 million toward the deal. Those commitments could have evaporated with Iranian missiles raining down on their home countries. Gulf states have started reviewing how they deploy their sovereign wealth in anticipation of offsetting severe economic losses triggered by the war, Reuters reported on Wednesday citing an unnamed Gulf official.

At least SoftBank still owns more than 90% of PayPay and will benefit from any future gains in secondary trading. If the pace of new commitments from petrodollar sovereign funds slows, it will threaten deals around the world.

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CONTEXT NEWS

SoftBank Group-backed PayPay priced its U.S. initial public offering at $16 per share on March 11, per a filing by group subsidiary LY Corp. That was below a target range of $17 to $20 and valued the Japanese e-wallet and credit card provider at $10.7 billion. The share sale raised $880 million.

The IPO roadshow had been slated to launch on March 2 but was delayed as the U.S. and Israeli strike on Iran rattled markets and triggered retaliatory missile attacks on other Middle Eastern countries, according to a Reuters report, including those of cornerstone investors with combined commitments of more than $200 million.

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