GREE Mobile Social Networking Site of Japan Launches IPO
By Azam on December 23, 2008 
Japanese social networking site operator Gree soared 45% on their trading debut on the Tokyo bourse on Wednesday, becoming a a rare bright spot in a dismal year in the IPO market. Gree the mobile social networking service provider, is currently valued at ¥107B yen ($1.2B), and has overtaken Mixi the leading social networking company as the most valuable firm on the Tokyo Stock Exchange’s Mothers market for start ups. The four-year-old firm grew out of the president of the company 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.
The successful debut instantly made GREE the No. 4 player among Japan’s listed web companies, only trailing Yahoo Japan(market cap: $24.3 billion, $7 billion more than Yahoo America), online shopping site Rakuten($8 billion) and Mobage-town providerDeNA ($1.42 billion).
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.
GREE’s revenues are derived from sales, 70% comes from virtual items and 30% from ads. That’s a high ratio of virtual sales for a mobile site. In contrast, Mixi is heavily dependent on advertisements (the site generates less than 10% of its revenues through premium accounts and has no avatar system).
For fiscal 2008 (that ended in June), GREE reported revenues of $33 million while profits exceeded $11 million. But profits ballooned to $15.6 million between July and September during this year alone (revenues jumped to $22 million in the same quarter).
The networking site Gree first started as a PC service but now earns most of its revenue from its mobile service after it tied with KDDI Corp, , Japan’s No. 2 wireless carrier. KDDI holds a 7.6 percent stake in Gree.
In 2006, GREE received around $4 million in funding from KDDI, Japan’s No. 2 telecommunications company, triggering a complete realignment in corporate strategy. The site started to focus solely on the mobile web (it’s the default social network for KDDI’s 25 million cell phone subscribers).
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 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.
Masayuki Otani, chief market analyst at Securities Japan, said the Internet sector has been one of a few industries that have fared well as Japan’s stocks tumbled amid the global financial crisis. That had also helped Gree’s debut, along with its strong growth outlook, he said.
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TechCrunch Mobile Social Network GREE Lands Big IPO, In Japan
Tags : , DeNA, Gree, Japan, KDDI, Mobage, Mobile Social Networking, Rakuten, Virtual Sales, yahoo Japan, Yoshikazu Tanaka