* U.S. listing attractive due to higher valuations - source
* PayPay needs to demonstrate path to profitability - source
* Z Holdings shares jump almost 6%
* SoftBank targeting U.S. listing for chip designer Arm
TOKYO, July 12 (Reuters) - SoftBank is considering a U.S. listing for its PayPay payments business, three sources familiar with the matter said, in what could mark another American listing for Masayoshi Son's sprawling tech conglomerate along with chip designer Arm.
New York is seen as a more attractive destination than Tokyo for listings given the higher valuations tech companies generally achieve there, one of the sources said. The timing of the listing was still unclear as money-losing PayPay needs to first demonstrate a clear path to profitability, the source said.
SoftBank has previously set a PayPay listing as a goal, with one executive saying in November it was worth just under 1 trillion yen ($7.17 billion). That the conglomerate is considering a U.S. listing has not been previously reported.
Representatives for PayPay and SoftBank Group's domestic telecoms business, SoftBank Corp, said they would not comment on speculation. PayPay is owned by SoftBank Corp, its internet business, Z Holdings, and the group's second Vision Fund.
All of the sources declined to be identified as the information is not public.
SoftBank Group shares closed up 2%, with Z Holdings surging almost 6% in their biggest one-day gain since February.
Listings of Japanese companies in New York are rare. Tokyo-based chat app operator Line had a dual listing in 2016 and later merged with SoftBank's internet business, with more recent examples including the listing of Syla Technologies in March, according to Dealogic.
"Z Holdings shares reacted on hopes that a U.S. listing might invite a premium valuation but recent domestic listings for Rakuten Bank and SBI Sumishin Net Bank indicate there is room for fintech listings locally," said analyst Kirk Boodry at Astris Advisory Japan, who values PayPay at 800 billion yen to 900 billion yen.
NARROWING LOSSES
SoftBank founder Son recently pledged to shift to "offence mode" amid rising global interest and investment in artificial intelligence. He has been playing defence for some time, curbing his investments after the tech sell-off hit the value of his portfolio companies hard.
PayPay, which offers QR code payment services, is used by more than 55 million people in Japan, making it a top player in a crowded digital payments market.
It has benefited from a government-backed effort to encourage consumers to shift towards digital away from cash and grew quickly by offering aggressive rebates.
PayPay booked a loss before interest, taxes, depreciation and amortisation of 11.9 billion yen in the year ended March, compared to a loss of 43.2 billion yen a year earlier.
The telecoms business is targeting profitability for its financial unit, which includes PayPay, by the year ending March 2026. PayPay is the most widely mobile payment service in Japan, according to a survey of users by Mobile Marketing Data Labo.
SoftBank is planning an initial public offering for Cambridge, England-based chip designer Arm in the U.S. as it looks to raise funds following the slump in tech valuations. ($1 = 139.5500 yen) (Reporting by Sam Nussey and Miho Uranaka; Additional reporting by Scott Murdoch; Editing by David Dolan and Muralikumar Anantharaman)
