F-1/A: Libera Gaming Operations Eyes NYSE American Listing with $6 Million IPO

Libera Gaming Operations, a Japanese pachinko hall operator, is seeking to raise capital through an initial public offering of 1,000,000 common shares, aiming for a listing on the NYSE American.

Summary

• Libera Gaming Operations, Inc., a Japanese pachinko hall operator, has filed a pre-effective amendment to its Form F-1 registration statement.
• The company is offering 1,000,000 common shares with an expected initial public offering price between US$5.00 and US$7.00 per share, with an assumed price of US$6.00.
• The company intends to list its common shares on the NYSE American under the symbol LBRJ.
• The offering also includes warrants to purchase 70,000 common shares for the underwriters representative, exercisable at US$7.50 per share.
• Toyotaka Nagamori, the CEO, currently owns 63.6% of the voting power and will control approximately 58.2% after the offering.
• The company is an emerging growth company and a foreign private issuer, allowing for reduced reporting requirements.
• The company operates eleven pachinko halls in Japan and also has a real estate business.
• For the year ended October 31, 2023, the company reported total revenues of 6,106,306 thousand (US$40,317 thousand) and net income of 557,802 thousand (US$3,685 thousand).
• The company intends to use the net proceeds from this offering to fund working capital and general corporate purposes, which may include investments, acquisitions, or strategic collaborations to expand our customer base, as well as the development and marketing of new services.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company highlights its experience and growth strategies, it also acknowledges challenges in the industry and specific operational setbacks. The financial results show profitability, but also a decrease in revenue compared to the previous year.

Positives

• The company has over 59 years of experience in the pachinko industry.
• The company is one of the largest pachinko hall operators in Japan, ranking in the top 10% based on the number of halls operated.
• The company has a profitable real estate business in addition to its pachinko operations.
• The company reported net income of 557,802 thousand (US$3,685 thousand) for the year ended October 31, 2023.
• The company intends to expand its pachinko business through acquisitions and new hall openings.

Negatives

• The pachinko industry in Japan is facing a long-term downward trend.
• The company has total liabilities of 17,769,154 thousand (US$117,319 thousand) as of October 31, 2023.
• The company experienced a fire at one of its pachinko halls, resulting in temporary suspension of operations and repair costs.
• The company relies on a small number of customers for a large percentage of its real estate revenues.
• The company relies on certain suppliers for the purchase mainly of property and equipment.

Risks

• The company's ability to raise capital in the future may be limited.
• Public health epidemics or outbreaks could adversely impact the business.
• The company may be subject to supply chain disruptions and inflationary pressures.
• A continuing long-term downward trend in the pachinko market in Japan may have an adverse effect on operations and financial conditions.
• The company may not be able to renew leases or obtain desirable sites for expansion.
• Rising operating costs could have a negative impact on the business.
• Real estate development projects are subject to numerous risks outside the company's control.
• The company relies on contractors, which can expose it to various liability risks.
• A material amount of the company's revenues may be concentrated in one or more large customers.
• The trading of the company's common shares could experience extreme stock price run-ups followed by rapid price declines and strong stock price volatility as experienced in recent initial public offerings.

Future Outlook

The company expects the real estate market in Tokyo to continue to grow and anticipates an increase in new customers and the return of pre-COVID-19 customers with the introduction of smart pachinko/pachislot machines.

Management Comments

• We believe that the real estate market in Tokyo is relatively cheaper than other international cities, and as such we expect that more investors will be attracted to property in Tokyo and the real estate market will continue to grow in the future.
• We believe that the pachinko hall industry has not yet recovered to the pre-COVID-19 level, and we can expect it to at least recover to the pre-COVID-19 level.
• In that context, if we stay in the industry and continue to expand our network through new store openings, mergers and acquisitions, and other means, we believe that we will be able to continue to earn significant profits in the Pachinko industry.

Industry Context

The announcement reflects a trend of consolidation in the Japanese pachinko industry, with larger operators like Libera Gaming Operations seeking to expand their market share amid declining gross pay-in and increasing regulatory burdens.

Comparison to Industry Standards

• The document mentions that there are only 161 pachinko hall operators that operate more than ten pachinko halls out of a total of 1,623 operators in Japan as of 2023, positioning Libera Gaming Operations in the top 10% of operators based on the number of halls.
• The document references the Pachinko and Pachislot Industry 21st Century Association Pachinko Pachislot Industry Report 2023 and General Incorporated Association Japan Amusement Business Association Pachinko Industry Data Book 2023 Ver.03 to provide industry context and data.
• The document references Miki Shoji Statistics office report Tokyo 2023 Tokyo business district to provide industry context and data for the real estate industry.

Related Party Transactions

• The Company entered into 4 operating lease agreements with the Chief Executive Officer for terms ranging from 6 to 10 years.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• Employees may be affected by changes in business strategy and operations.
• Customers may benefit from improved facilities and services.
• Suppliers may be affected by changes in procurement practices.

Next Steps

• The company intends to apply to list its common shares on the NYSE American.
• The company believes that the hall can be repaired and re-opened during the fourth quarter of the fiscal year ending October 31, 2024.

Key Dates

Keywords

pachinko, IPO, gaming, real estate, Japan, NYSE American, offering, pachislot