Exclusive-Japan’s Rakuten weighing US IPO of credit card business, sources say

Rakuten Considers U.S. IPO for Credit Card Business

Rakuten, a prominent e-commerce and finance company based in Japan, is reportedly exploring the possibility of an initial public offering (IPO) in the United States for its credit card business. According to inside sources, Rakuten has been contemplating a U.S. listing for one of Japan’s largest credit card businesses since last month. While the discussions are still in the early stages, other potential options such as a stake sale to a strategic buyer are also being considered.

The decision to consider a U.S. IPO for Rakuten Card was partly influenced by the plans of rival company SoftBank to list app pay operator PayPay in the U.S. This move by SoftBank has prompted Rakuten to explore similar opportunities for its credit card business. Although the company has not officially confirmed these plans, the information comes from reliable sources familiar with the matter.

Last year, Mizuho Financial Group acquired a 15% stake in Rakuten Card for 165 billion yen ($1.1 billion), valuing the business at over 1 trillion yen or $7 billion. This partnership led to the launch of joint credit cards between the two companies. In comparison, institutional investors have estimated a baseline valuation of 2 trillion yen for PayPay, with expectations that it could exceed 3 trillion yen in its upcoming IPO, potentially scheduled for December.

Credit cards play a vital role in Rakuten’s diverse range of services, including online shopping, banking, and travel. The company, led by founder and CEO Hiroshi Mikitani, revolutionized Japan’s finance sector by simplifying the credit card application process and making it accessible to a wider consumer base. Rakuten’s customers earn loyalty reward points through their credit card transactions, contributing to the company’s overall business strategy.

Rakuten Card, which has issued over 30 million credit cards in Japan, reported a 20% growth in non-GAAP operating profit to 62 billion yen last year. However, there was a slight decline of 4.5% in the April-June quarter of this year due to increased costs. Despite this, Rakuten Card aims to boost its profit to 100 billion yen in the medium term, with plans to expand its business partnerships with corporate clients, as highlighted by CEO Koichi Nakamura earlier this year.

As Rakuten explores the potential of a U.S. IPO for its credit card business, the company’s shares surged after the Reuters report, closing up 4.7% compared to a 1.6% rise in the Topix index. With its innovative approach to finance and e-commerce, Rakuten continues to be a key player in Japan’s financial landscape, with ambitions to expand its global presence through strategic initiatives like a U.S. IPO.