* Mercari's IPO priced at top end of indicative range
* IPO to raise up to $1.2 bln including overallotment
* Mercari is Japan's first and one of only two unicorns (Adds quote from underwriter, comment from sources on IPO demand and background)
By Taiga Uranaka
TOKYO, June 11 (Reuters) - Japanese flea market app operator Mercari Inc's IPO is raising up to $1.2 billion in the nation's biggest such share sale so far this year, as the firm seeks to replicate its domestic success overseas, especially in the money-losing U.S. market.
Mercari said in a regulatory filing on Monday its initial public offering was priced at 3,000 yen ($27.29) per share, at the top of an indicative range of 2,700-3,000 yen, valuing Japan's first and one of only two unicorns at $3.7 billion.
The firm, which offers a popular smartphone app that allows people to trade used items online, will list on the Tokyo Stock Exchange's Mothers market on June 19.
Both domestic retail investors and overseas funds were enthusiastic about the loss-making startup's IPO, sources said.
"Demand was exceptionally strong, with many new accounts opened and new money flowing in," said Hitoshi Toyoshima, general manager, corporate finance, at online brokerage Monex Inc, which is among Mercari's underwriters.
Mercari's IPO is set to raise the most funds among Japanese IPOs this year and become the country's third largest tech listing in the past five years - behind the $3.2 billion raised by Japan Display in 2014 and the $1.3 billion by Line Corp in 2016 - according to Thomson Reuters data.
Founded in 2013, Mercari was Japan's first unicorn - a startup with a valuation above $1 billion - in a country that boasts numerous successful giant corporations but lacks a vibrant startup culture. According to data provider CB Insights, Mercari and information technology startup Preferred Networks Inc are the only two unicorns in Japan.
Mercari, meaning "to trade" in Latin, has become a household name in Japan by touting an easy-to-use online flea market, where users can sell and buy old clothes, books, home appliances and even items such as toilet paper tubes and empty pet bottles via the smartphone app, often with a single click.
Mercari, though, has been criticized sometimes for lax controls, including for allowing stolen items to be sold. The company has said it has been beefing up monitoring and customer support to weed out improper transactions.
While the company is profitable at home, its expansion in the United States, where it is headed by former Facebook Inc executive John Lagerling, dragged it into a net loss of 4.2 billion yen for the year ended in June last year.
In Japan, where its app has been downloaded 71 million times so far, the company had a total transaction volume of 250.7 billion yen in the first nine months of the current financial year. By comparison, in the United States, its app has been downloaded 37.5 million times but it had a transaction volume of only 16.9 billion yen during the same period.
At home, Mercari competes against rival apps run by Yahoo Japan and Rakuten. In the United States, the world’s second-largest e-commerce market, it wants to take on eBay and others.
"We can't be successful globally without success in the U.S.," its founder and chief executive Shintaro Yamada told Reuters in an interview in April. "If a service is accepted in the U.S., it tends to become universal."
For its current financial year, the company has given only a sales forecast, predicting a 62.2 percent year-on-year increase to 35.8 billion yen.
The IPO represents a mix of new shares and a selldown by some existing shareholders. Together with an overallotment option, it will raise almost 131 billion yen. ($1 = 109.9300 yen) (Additional reporting by Miho Ozawa; Editing by Muralikumar Anantharaman)