Tokyo Metro, one of the world's busiest subways, kickstarted its market debut with a strong note on Wednesday, with shares rising nearly 50% after its government owners raised $2.3 billion in Japan's biggest initial public offering (IPO) in six years.
Each day, around 6.5 million people – more than the London Underground – ride Tokyo Metro's nine lines, part of a vast transport network serving the capital and its sprawling suburbs.
The company's shares closed at 1,739 yen ($11.43), 45% up from their issue price of 1,200 yen. Earlier, they were up 47%.
The 348.6 billion yen proceeds will redeem reconstruction bonds issued after the 2011 earthquake, tsunami and nuclear disaster in northeast Japan that killed 18,000 people.
The listing reduces government ownership, split between the nation and Tokyo city, to around 50%. Many Japanese rail operators are already privatized.
To attract investors, perks for buying more than 200 shares included tickets to the Tokyo Metro museum and golf range, as well as free tempura toppings at its noodle stands.
Reports said the issue was 15 times oversubscribed among investors.
The IPO is Japan's largest since tycoon Masayoshi Son's tech and telecoms conglomerate SoftBank Group raised a national record of $23.5 billion by listing its mobile unit in 2018.
London built the first public underground railway, but in 1927, Tokyo became the first Asian city with a subway.
These days, four other subway lines are run separately by the Tokyo government, alongside East Japan Railway's overground routes, such as the circular Yamanote Line and other private services.
Analysts said the firm's strong profits and stable business – with Tokyo less affected by Japan's demographic crisis – and high dividend yield attracted investors. In the year to March 2025, it expects to pay 40 yen per share.
Tokyo Metro posted a net profit of 46 billion yen for the fiscal year that ended in March 2024, up 67% from a year earlier. This year, the company is aiming to increase this to 52 billion yen.
The firm's spectacular debut raised questions about why the government did not try to secure a higher price at the IPO.
But Shiki Sato, strategist of Tokyo Securities, told Agence France-Presse (AFP) it is "quite common that the first price goes higher than the initial public offering price, especially in Japan, as the offering price is based on earnings, but that does not include investors' expectations."
The share price of Japanese companies that have gone public this year has risen 34% on average, Bloomberg News reported, citing Ichiyoshi Securities.
The "low volatility" of Tokyo Metro makes its shares a safe prospect for ordinary Japanese investor households, Hideaki Miyajima, a professor in commerce at Waseda University, said before the IPO.
"And for institutional investors, the Japanese market is very favorable given the very low exchange rate" of the yen and recent corporate governance reforms, he added.
Tokyo Metro president Akiyoshi Yamamura said: "I believe (the share price rise) is the result of many people thinking highly of us. I would like to express my gratitude. We will continue to try to live up to the expectations of our shareholders."
The listing comes ahead of elections in Japan on Sunday, with polls suggesting Prime Minister Shigeru Ishiba's Liberal Democratic Party might fall short of a majority for the first time since 2009.
The world's fourth-largest economy has been struggling to gain traction, while a falling population means firms in many sectors are having trouble filling vacancies.
The International Monetary Fund (IMF) on Tuesday slashed its 2024 growth forecast for Japan to 0.3% but projected it would expand 1.1% next year.
