Recruit Shares Jump in Tokyo Debut After $1.9 Billion IPO

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Recruit Holdings Co. surged more than 7 percent in its Tokyo trading debut as Japan’s top provider of short-term workers gained from a push to encourage more temporary and part-time employment in the country.

The stock gained as much as 11 percent before closing at 3,330 yen, up from an offer price of 3,100 yen. The Topix index fell 2.3 percent. The Tokyo-based company raised 197 billion yen ($1.9 billion) with its owners on Oct. 6 in Japan’s second-biggest share sale this year.

Chief Executive Officer Masumi Minegishi plans to use some of the proceeds for acquisitions overseas and in Japan, where the government wants to allow more temporary employment to boost competitiveness. The successful IPO follows a string of lackluster debuts this year in Japan, which saw companies fall an average of 10 percent from their offer prices when adjusted for deal size, data compiled by Bloomberg show.

“As the overall market slumps, investors’ attention seems to be drawn to Recruit,” Hiroaki Hiwada, a Tokyo-based strategist at Toyo Securities Co., said after the start of trading. “With something this size, there’s a possibility it’ll be regarded as a benchmark for various IPOs.”

Japan Display

Prime Minister Shinzo Abe’s cabinet is pushing to open more of the economy to non-permanent employees as part of an effort to make Japanese companies more competitive and boost economic growth. The cabinet has submitted a bill to parliament that would change the Dispatch Worker Law to allow non-permanent employees in all jobs, up from 26 currently.

Recruit provides temporary and permanent staffing to companies, and Internet information services on topics including travel, real estate and weddings. The company offered its shares at the top end of their marketed range, after initially going as low as 2,800 yen apiece, according to a filing with Japan’s finance ministry.

The successful debut follows that of restaurant operator Skylark Co., which fell 4.8 percent below its offer price on its first day of trading Oct. 9 after a 66.8 billion yen IPO. Japan Display Inc. has lost more than half of its value since the company’s $3.1 billion public offering in March, falling 15 percent on the first day.

The maker of mobile-device screens for Apple Inc. forecast a surprise annual loss because of delayed shipments, according to a person familiar with the matter. The company’s stock plunged as much as 18 percent.

Bribery Scandal

Recruit forecasts net income of 66 billion yen for the year through March 2015, up 0.9 percent from a year earlier, according to a statement last month. It expects revenue to increase 8.3 percent to 1.3 trillion yen.

“Investors are expecting Recruit to further expand their global staffing-service operation on one hand, and the other pillar of their business, information services,” Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo, said before the stock’s trading debut. “Recruit’s been offering a wide range of information and value-added services to meet consumers’ demand.”

Morgan Stanley, Nomura Holdings Inc., Bank of America Corp., Mizuho Financial Group Inc. and SMBC Nikko Securities Inc. were the lead underwriters for the offering.

Recruit, founded in 1960, grabbed unwanted international attention more than a quarter century ago, when it was embroiled in a political-donation scandal that brought down the government of then-Prime Minister Noboru Takeshita. At the center of the storm were charges of shares-for-favors tied to the IPO of a Recruit unit.

A 1990 court ruling established that shares of Recruit Cosmos Co., a real-estate unit, were distributed as bribes before it went public, according to a New York Times report at the time. The ensuing public disenchantment with the money-raising practices of the dominant ruling Liberal Democratic Party helped to usher in a period of political realignment that for a time saw the LDP lose power.