Japan's Online-Shopping King Gets Lift From IPO -- WSJ
March 30 2019 - 3:02AM
Dow Jones News
By Mayumi Negishi
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 30, 2019).
TOKYO -- The debut of Lyft Inc. shares at a valuation of $24
billion marks the arrival of Japanese billionaire Hiroshi Mikitani
to the list of Silicon Valley's venture-capital heavyweights.
Mr. Mikitani leads Japanese e-commerce company Rakuten Inc.,
which has steadily built on its first $300 million investment in
Lyft in 2015. Its accumulation of a 13% stake turned Rakuten into
the biggest investor in the ride-hailing company. It will earn an
unrealized profit of about $1.5 billion from the Lyft public share
offering, according to estimates based on VentureSource data.
Often outshone in Japan by SoftBank Group Corp.'s founder
Masayoshi Son -- a backer of Lyft rival Uber Technologies Inc.
through SoftBank's near-$100 billion Vision Fund -- Mr. Mikitani
has been more cautious in his investments.
Mr. Mikitani founded Rakuten in 1997 and soon built Japan's
biggest e-commerce site and online bank, promising rapid overseas
expansion. But the bulk of Rakuten's revenues still remain in
Japan, where it is fighting for its lead against an ascendant
Amazon.com Inc.
To find growth, Rakuten has taken minority stakes in companies
including image-search company Pinterest Inc. and Middle Eastern
ride-hailing firm Careem Networks FZ. It has also sponsored the
Golden State Warriors basketball team and the FC Barcelona soccer
team to raise its profile in Silicon Valley and around the
world.
Four years ago, Rakuten made its first investment in Lyft at a
valuation of roughly $2.5 billion. At the time, Lyft was burning
through cash in its fight against market pioneer Uber.
The Japanese company later invested at valuations of up to $7.5
billion, according to VentureSource.
The Lyft initial public offering means Mr. Mikitani notches a
win over Mr. Son, whom he once advised on acquisitions while
working at the Industrial Bank of Japan, which later merged into
Mizuho Financial Group Inc.
Mr. Son's SoftBank Vision Fund, backed with money from Saudi
Arabia and Abu Dhabi, has invested billions in ride-hailing
companies, including China's Didi Chuxing Technology Co., India's
ANI Technologies Pvt.-owned Ola, and Southeast Asia's Grab Holdings
Inc., in addition to Uber. SoftBank itself has invested in Brazil's
99, which competes with Cabify, which has an investment from
Rakuten. None have yet launched an IPO -- a move that Mr. Son is
betting will validate the big valuations the Vision Fund has
paid.
The areas in which Messrs. Mikitani and Son compete have grown
over time. Rakuten plans to move into Japan's mobile-phone carrier
sector later this year, fighting for the same users that constitute
the core of SoftBank's cash-churning investment apparatus.
For its part, SoftBank-backed Yahoo Japan Corp. has been trying
to woo vendors and buyers away from Rakuten's e-commerce
operations.
SoftBank and Rakuten are also locked in a battle on multiple
fronts for dominance in Japan's mobile payments, which involves
messaging apps, banks and convenience store chains -- a fight in
which SoftBank has enlisted China's Alibaba Group Holding Ltd. and
India's Paytm.
Rakuten and SoftBank even operate rival professional baseball
teams in Japan.
The Lyft IPO creates a war chest for Rakuten's push to build out
its services in mobile phones, payments, logistics, and insurance.
The planned foray into mobile phones could be especially costly.
Major market incumbent NTT Docomo Inc. has pledged to use its scale
to lower costs by up to 40% at a time when operators are lifting
investment for faster 5G networks. Those costs come as Rakuten's
margins in e-commerce have halved in the last two years as it
battles Amazon and others.
David Gibson, chief investment adviser for Astris Advisory
Japan, says it is highly likely Rakuten will sell some of its
investments, which could include a part of its stakes in Lyft and
Dubai-based Careem. This week, Uber said it is acquiring Careem for
$3.1 billion.
Rakuten declined to make Mr. Mikitani available for an interview
and a company spokeswoman declined to comment on its plans for its
Lyft stake ahead of Lyft's IPO. It also declined to comment on its
Careem stake.
Write to Mayumi Negishi at mayumi.negishi@wsj.com
(END) Dow Jones Newswires
March 30, 2019 02:47 ET (06:47 GMT)
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