By Miho Uranaka and Sam Nussey
TOKYO (Reuters) – Japanese e-commerce and financial giant Rakuten is contemplating an initial public offering (IPO) for its credit card division in the United States, according to two insiders familiar with the discussions.
Sources revealed that Rakuten started exploring the possibility of listing one of Japan’s prominent credit card companies in the U.S. last month. The talks are still in their infancy, with alternative options including the sale of a stake to a strategic investor, as one source noted.
A significant factor behind Rakuten’s consideration for a U.S. IPO of Rakuten Card was the rival SoftBank’s intention to take app payment provider PayPay public in the U.S., the source indicated. The sources chose to remain anonymous as the information is not yet public.
The potential for a U.S. IPO from Rakuten had not been previously reported.
Rakuten did not provide any comments upon request. Following the Reuters report, the company’s shares rose further, closing up by 4.7%, while the Topix index increased by 1.6%.
Last year, Mizuho Financial Group acquired a 15% stake in Rakuten Card for 165 billion yen (approximately $1.1 billion), assigning a value of more than 1 trillion yen (about $7 billion) to the business, which has launched joint credit cards with Mizuho.
Institutional investors estimate that PayPay has a baseline valuation of 2 trillion yen, with projections suggesting it could surpass 3 trillion yen during its IPO expected as early as December, Reuters reported recently.
CREDIT CARDS AT THE CORE OF RAKUTEN’S OPERATIONS
Led by founder and CEO Hiroshi Mikitani, Rakuten transformed Japan’s finance industry by streamlining the application process for credit cards, making them accessible to a broader audience.
Credit cards play a vital role in Rakuten’s multifaceted business model, which encompasses online shopping, banking, travel, and additional services, allowing customers to earn loyalty reward points with their purchases.
Two years ago, Rakuten went public with Rakuten Bank as the group faced significant losses due to the launch of its mobile network.
In addition to their plans for Rakuten Securities, Mizuho provided capital by acquiring stakes in both the brokerage and card sectors.
Rakuten Card has issued over 30 million credit cards within Japan. The non-GAAP operating profit for the division rose by 20% to 62 billion yen last year; however, it witnessed a 4.5% decline in the April-June quarter of the current year compared to the same time frame a year ago due to increased costs.
Rakuten Card is targeting a profit expansion to 100 billion yen in the medium term, with ambitions to broaden its client base among corporate customers, as stated by its CEO Koichi Nakamura in March.
