Tokyo Metro Co., the operator of one of the world’s largest and busiest subway networks, made an impressive entrance into the stock market on Wednesday, with its shares surging as much as 47% in their trading debut. The company’s initial public offering (IPO) attracted intense investor interest, pushing the stock price up from its offering price of ¥1,200 ($8) to as high as ¥1,768, before opening at ¥1,630.
The IPO, which raised ¥348.6 billion ($2.3 billion), marks Japan’s largest since the 2018 listing of SoftBank Corp., one of the country’s leading mobile carriers. The deal was massively oversubscribed, with demand from investors exceeding the available shares by more than 15 times, according to several of the lead underwriters.
Tokyo Metro’s IPO has been closely watched by investors, market analysts, and the broader financial industry due to the company’s role as a critical infrastructure provider in Tokyo, one of the most densely populated urban areas in the world. The subway system serves more than 6.5 million passengers every day, making it a cornerstone of Japan’s urban transport network.
“We thought the IPO price was too low and its fair value would be around ¥1,600,” said Taku Ito, chief equity fund manager at Nissay Asset Management. “This is a typical dividend stock. It is also a defensive stock. I doubt there’s much upside to its stock prices, but it is a stock you can hold for a long time at current levels.”
Investors and analysts alike have highlighted the attractiveness of Tokyo Metro shares due to their stability and potential for reliable dividend payments. In a country where an aging population poses challenges for many companies, Tokyo Metro’s business remains robust because of its focus on an urban area less vulnerable to demographic decline. The company’s steady passenger demand and its position as a key component of Tokyo’s daily life make it an appealing long-term investment.
While Tokyo Metro’s stock may not offer high growth potential, its high dividend yield by Japanese standards and stable earnings are compelling features. “This stock is one you can hold for the long term at the current levels, especially with a high dividend yield,” Ito added.
Tokyo Metro’s listing is notable in a year that has seen positive momentum in Japan’s IPO market. The share prices of companies that have gone public in 2024 have risen by an average of 34%, according to data from Ichiyoshi Securities Co. This indicates a favorable market environment for new public offerings and adds to the enthusiasm surrounding Tokyo Metro’s stock.
While Tokyo Metro’s core business remains its subway operations, the company is also involved in real estate, which contributes a smaller but significant portion of its earnings. For the current fiscal year ending in March 2025, Tokyo Metro forecasts a 13% rise in net profit to ¥52.3 billion ($352 million). The transportation business, buoyed by increasing inbound tourism and local ridership, is expected to see an 18% rise in operating income, reaching ¥75.3 billion.
Despite these optimistic forecasts for the transportation sector, growth in the real estate side of the business is anticipated to be limited, with operating income projected to remain around ¥4.5 billion. Analysts have pointed out that while the real estate business provides some additional revenue, the primary driver of Tokyo Metro’s value lies in its core subway operations.
Investors are attracted to the stability of the company’s business, with some suggesting the stock could rise further. Mitsushige Akino, president of Ichiyoshi Asset Management, predicted that Tokyo Metro shares could climb another 13%, reaching around ¥2,000 per share, thanks to strong interest from retail investors. Akino also noted that foreign investor appetite might increase once Tokyo Metro is included in a major stock index.
The IPO was partly driven by legislative requirements mandating the government to reduce its ownership stake in Tokyo Metro by March 2028. The proceeds from the sale of shares will go toward repaying debt issued in the aftermath of the 2011 earthquake and tsunami. The Japanese government and the Tokyo metropolitan government’s combined shareholding in the company will be halved following the offering, but they will remain significant stakeholders.
The public nature of Tokyo Metro’s operations means that the company is unlikely to pursue aggressive fare hikes or prioritize profit maximization, according to market experts. “Given the public utility role it plays, Tokyo Metro will find it difficult to rapidly raise fares and pursue profits,” said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management Co.
Fujiwara echoed the sentiments of other analysts, highlighting that Tokyo Metro’s appeal lies in its steady and stable performance. “For investors, as long as the share price doesn’t fall below ¥1,200 and remains stable, it’s good enough to be able to reliably receive dividends and shareholder benefits,” he added. While the company’s property business has limited growth prospects, Fujiwara noted that Tokyo Metro’s financial results would remain solid but without any signs of a steady upward trend.
Tokyo Metro’s successful IPO is expected to have broader implications for Japan’s stock market, particularly in terms of encouraging more individual investors to participate. The listing of a company with such wide public recognition and a customer base that includes millions of daily commuters could help expand the pool of retail investors in Japan, which has traditionally been underrepresented in the market compared to institutional investors.
Toshio Morita, chairman of the Japan Securities Dealers Association, emphasized the significance of Tokyo Metro’s IPO for the market during a press conference on October 16. “It will have a very significant benefit in terms of expanding the investor base for Japanese stocks,” Morita said. He added that he hoped the listing would lead to an increase in the number of individual investors who buy shares, given the familiarity and trust people have in Tokyo Metro as a service provider.
Tokyo Metro operates nine subway lines and 180 stations in Tokyo, providing essential transportation services to residents, workers, and tourists alike. By comparison, it serves nearly twice as many daily riders as the New York City subway, further underlining the scale and importance of its operations.
Tokyo Metro’s IPO is being hailed as a success for Japan’s securities industry, which has been eagerly awaiting a major public offering after a six-year gap since SoftBank’s debut. Market participants are closely observing Tokyo Metro’s performance, given that it is the first major deal in years and involves a company with deep ties to daily life in Tokyo.
The strong demand for Tokyo Metro shares is seen as a positive signal for future IPOs in Japan, particularly those of other government-affiliated companies or public utilities. The success of the Tokyo Metro IPO could pave the way for more listings from similar companies in the future, helping to rejuvenate Japan’s IPO market, which has faced challenges in recent years.
Tokyo Metro Co.’s strong debut on the Tokyo Stock Exchange has underscored its position as a stable, dividend-paying stock that is likely to appeal to long-term investors. While the company’s growth potential may be limited due to its public utility nature and the maturity of its real estate business, the stable earnings from its subway operations make it an attractive option for those seeking a defensive investment in Japan’s stock market.
As the government continues to sell off its stake in the company over the next several years, and as Tokyo Metro potentially gains inclusion in key stock indices, interest in the stock could remain strong among both retail and institutional investors. For now, Tokyo Metro’s solid financial foundation and critical role in Tokyo’s transportation infrastructure provide a compelling case for its future as a reliable dividend stock in the Japanese market.
