F-1: Libera Gaming Operations Eyes NYSE American Listing with $8.05 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, is planning an initial public offering (IPO) to list its common shares on the NYSE American.
• 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.
• The assumed initial public offering price per share is US$6.00, the midpoint of the anticipated price range.
• The offering also includes the registration of warrants to purchase 70,000 common shares for the underwriters and 70,000 common shares issuable upon exercise of the warrants.
• Toyotaka Nagamori, the CEO, currently owns 63.6% of the voting power and will control approximately 58.2% after the offering.
• The company intends to use the net proceeds for working capital, general corporate purposes, investments, acquisitions, or strategic collaborations.
• Libera Gaming Operations has been operating pachinko halls for over 58 years and operates eleven pachinko halls in Japan as of March 15, 2024.
• For the years ended October 31, 2023 and 2022, the company reported total revenues of 6,106,306 thousand (US$40,317 thousand) and 7,906,120 thousand, respectively, net income of 557,802 thousand (US$3,685 thousand) and 200,185 thousand, respectively, and net cash provided by operating activities of 3,203,829 thousand (US$21,153 thousand) and 5,257,783 thousand, respectively, on a consolidated basis.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While the company has a long operating history and plans for expansion, it also faces challenges in a declining industry and has significant liabilities. The IPO aims to raise capital for future growth, but there are risks associated with the offering and the company's operations.

Positives

• The company has a long operating history of over 58 years in the pachinko industry.
• The company intends to use the net proceeds for working capital, general corporate purposes, investments, acquisitions, or strategic collaborations.
• The company reported net income of 557,802 thousand (US$3,685 thousand) for the year ended October 31, 2023.

Negatives

• The pachinko industry is facing a long-term downward trend in Japan.
• The company has total liabilities of 17,769,154 thousand (US$117,319 thousand) as of October 31, 2023.
• The company is a controlled company, which means that it is exempt from certain corporate governance requirements of the NYSE American.

Risks

• The company's ability to raise capital in the future may be limited.
• The company's pachinko and pachislot business is sensitive to reductions in consumer discretionary spending.
• The company may not be able to renew leases or obtain desirable sites for expansion.
• The company is subject to regulatory risks and potential changes in the regulatory environment.
• The company is dependent on the skill and experience of its management and key personnel.
• The company's results of operations and financial condition could be materially adversely affected by the occurrence of natural disasters.
• 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 recovery of gross pay-in going forward after the continuing economic and social reopening from COVID-19, although we believe the downward trend to continue.

Management Comments

• 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 pachinko industry in Japan has been facing challenges such as declining gross pay-in and increased regulatory burdens, but large operators are gaining dominance.

Comparison to Industry Standards

• The pachinko industry represented 38.0% or 14.6 trillion (US$96.4 billion) of the gaming market in Japan in 2022 and was the largest gaming segment.
• 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, and we are one of the largest pachinko hall operators as we are in top 10% of all pachinko hall operators with respect to the number pachinko halls operated (Source: Pachinko hall operator survey 2023, Yano Research Institute).

Legal Proceedings

• On January 18, 2024, the Company experienced a fire at the Jaran Kawaguchi Yahei pachinko hall. The fire did not result in harm to any people or surrounding properties and to date, no claims have been asserted against us.

Related Party Transactions

• The company has entered into operating lease agreements with the Chief Executive Officer.
• The company has short-term loans from family members of the Chief Executive Officer.
• The company has sold real estate properties to a company controlled by the Chief Financial Officer.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• Employees may benefit from the company's growth and expansion plans.
• Customers may benefit from improved services and facilities.
• Suppliers may benefit from increased demand for their products and services.

Next Steps

• The company intends to apply to list its common shares on the NYSE American under the symbol LBRJ.
• 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.

Key Dates

Keywords

pachinko, IPO, gaming, Libera Gaming Operations, NYSE American, initial public offering, pachislot, Japan, warrants, real estate