It’s 7 p.m. on a Thursday in Tokyo and the city’s railway enthusiasts are gathered at their favourite drinking spot.
Kiha Bar, tucked down an unassuming backstreet near Ningyocho station, is decked out to replicate a Tokyo subway car. Above the red-and-white door hangs an authentic plastic sign directing revelers to the “tracks.” Customers are greeted with a cheery “Welcome aboard!” from owner Noboru Futakami, who serves beer, highballs and sake in his conductor’s hat. Handles hang from the ceiling, just within reach of unsteady drinkers, and like all subway carriages at rush hour in the Japanese capital, it’s standing room only.
Over the low rumble of trains on tracks — a recording played through a speaker behind the bar — customers debate the hottest issue of the moment: the upcoming initial public offering of Tokyo Metro Co., a sprawling underground railway system. To buy or not to buy shares is the question of the evening.
“The metro’s IPO and the perks they’re offering to shareholders has been a big topic,” said Futakami, 49, who quit his office job to set up Kiha in 2006 and has been serving the city’s trainspotters ever since. The metro has promised investors benefits ranging from train tickets to free tempura at its noodle restaurants and entry to the company’s golf range.
“Some of my regulars, the diehard railway fanatics, are very keen to buy metro shares,” Futakami added. “Some think the perks sound fun. Others aren’t impressed.”
Tokyo Metro’s public listing, scheduled for Oct. 23, is Japan’s biggest IPO since 2018, with the national and Tokyo metropolitan governments raising ¥348.6 billion ($2.3 billion) by selling 50% of their combined stake. The company, whose origins date back to 1920, operates nine lines and 180 stations, connecting the site of Tsukiji’s famous fish market to Shibuya’s bustling shopping district and the government offices of Kasumigaseki. Its trains carry more than 6.5 million passengers a day in the world’s biggest metropolitan area.
The perks on offer reflect the metro’s desire to lock in retail investors to balance the share register with big funds. Individual buyers are increasingly important to Japanese companies navigating a new environment of corporate governance reforms, rising shareholder activism and merger and acquisition activity as the economy emerges from decades of on-and-off deflation.
The metro is the biggest state-owned service in terms of market capital to list on the stock exchange since Japan’s postal service provider and its banking and insurance units were privatized in 2015. The national government plans to use its share of the proceeds to help rebuild areas damaged by the earthquake and tsunami off Fukushima in 2011.
It’s not just the railway fanatics in Kiha Bar who are excited. Across town in Stock Pickers, a bar in the swanky Ginza district where market watchers swap tips over finance-themed cocktails such as the “Warren Buffett” and “Abenomics,” the listing has been a hot topic for weeks.
Fumiaki Totsuka, a legal professional, has registered for 2,000 shares in the metro’s presale lottery. Investors must secure at least 200 shares, sold for ¥1,200 apiece, to be eligible for any perks.
“I didn’t even calculate details like the dividend yield, I just saw the perks and immediately decided to buy,” said Totsuka, 54, sipping an apple-flavored mocktail dubbed “The IT Bubble.” The longtime investor usually sticks to US bonds, stocks and credit, but jumped at the chance to snap up some free train tickets.
Retail investors like Totsuka are a growing force in Japan’s equity market, thanks to a tax-free investment account program that was bolstered by the government in January. At least ¥7.5 trillion went into shares from the so-called NISA accounts during the first six months of 2024, almost quadrupling the amount in the same period last year, according to the Japan Securities Dealers Association.
Japanese companies have historically doled out gifts to entice retail investors and there’s a renewed focus on perks to tap this funding source and boost loyalty. Convenience store operator Seven & i Holdings Co., currently attempting to fend off a buyout offer from Canada’s Alimentation Couche-Tard Inc., began offering gift cards to long-term shareholders earlier this year.
The subway operator’s promise of perks, which include free entry to the Tokyo Metro Museum, aims to “promote stock ownership among individual investors, who can be stable shareholders over the medium-to-long term,” according to Takuya Yashima, a company spokesperson.
For many investors, however, the desire to buy metro shares runs deeper than the perks.
“I have a soft spot for the metro,” said Totsuka, who uses the Ginza line to commute to work. “The subway is always on time and trains come every two to three minutes. I trust the system very much.”
Such affection is widely shared. The metro’s cars boast cleanliness, punctuality and orderliness, even at peak times — the stuff of dreams for frazzled commuters in London or New York. The catchy musical jingles and well-mannered staff at its stations have featured in many popular Japanese television dramas.
Consumer interest in owning a slice of a household name is compounded by dividend yields of more than 3% and the prospect of a stable investment amid increasingly unpredictable markets in Japan. Both of the country’s top stock gauges, the Topix and the Nikkei 225, have recovered from a historic rout in August but are still below July’s record highs.
“The company might have slow capital growth, but it’s a very, very safe investment,” said Francisco Betancourt, a French retail investor who has been living in Japan for 16 years and investing there for four. Betancourt, who works in the logistics industry, plans to buy shares in the metro once the excitement of the IPO has died down. He considers it a sensible long-term investment, given Tokyo is one of the few Japanese cities with a growing population.
Back in Kiha Bar, some of the regulars are concerned that a new focus on shareholder returns may undercut standards.
“The service is bound to go downhill somehow,” lamented Tomohide Ogawa, 48, a station attendant for one of Tokyo’s other train operators. “Companies that list all end up deteriorating.”
The threshold for accessing the perks — at least 200 shares for free tempura toppings on bowls of noodles and more than 10,000 for a six-month unlimited travel pass — has also raised eyebrows.
“I think they should be more generous,” said Ogawa, who spends his weekends exploring Japan’s countryside by train with his oncologist girlfriend, Ayuha Yoshizawa. The couple met in the bar four years ago and hope to one day ride Russia’s Trans-Siberian Railway.
Asked whether the perks had tempted her to buy in, Yoshizawa was quick to answer. “Not at all,” she said. “If such an iconic company is going to list, I’d expect more than some free tempura.”
