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

Libera Gaming Operations, a Japanese pachinko hall operator, is seeking to raise capital through an initial public offering of 1,000,000 common shares, priced between $5.00 and $7.00, to fund expansion and general corporate purposes.

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 under the symbol LBRJ.
• The company is offering 1,000,000 common shares with an expected price between US$5.00 and US$7.00 per share, with an assumed price of US$6.00 for prospectus purposes.
• The IPO aims to raise approximately US$4.94 million in net proceeds, which will be used for pachinko business expansion (60%), real estate business expansion (30%), and general corporate purposes (10%).
• The company has granted underwriters a 45-day option to purchase up to 150,000 additional common shares to cover over-allotments.
• Libera Gaming Operations currently operates eleven pachinko halls in Japan and also has a real estate business.
• For the years 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).
• Toyotaka Nagamori, the CEO, beneficially owns 63.6% of the voting power and will control approximately 58.2% after the offering, making the company a controlled company under NYSE American listing standards.
• The company is an emerging growth company and a foreign private issuer, allowing it to comply with certain reduced reporting requirements.
• A fire at the Jaran Kawaguchi Yahei pachinko hall in January 2024 caused damage and temporary suspension of operations, with estimated repair costs of 690 million (US$4.56 million) and insurance compensation of 580 million (US$3.83 million).

Sentiment

Score: 7

Explanation: The document presents a mixed sentiment. While the company shows growth in some areas and has plans for expansion, it also faces challenges such as industry decline, reliance on key customers and suppliers, and a recent fire incident. The better than expected results are a positive sign.

Positives

• The company has over 59 years of experience in the pachinko industry.
• Libera Gaming Operations is one of the largest pachinko hall operators in Japan, operating eleven halls.
• The company has a real estate business in addition to its pachinko operations, providing diversification.
• 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 business through acquisitions and renovations of existing pachinko halls.
• The company is expanding revenue through real estate development in central Tokyo.

Negatives

• The pachinko industry in Japan is facing a long-term downward trend.
• The company has a high concentration of revenue in the real estate business, relying on a small number of large customers.
• The company relies on certain suppliers for G-prizes and property and equipment.
• A fire at one of the pachinko halls in January 2024 caused damage and temporary suspension of operations.
• The company has total liabilities of 17,769,154 thousand (US$117,319 thousand) as of October 31, 2023.

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.
• The pachinko 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 potentially significant fines and penalties due to industry regulations.
• The company's operations are largely 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.
• Real estate development projects are subject to numerous risks outside the company's control.
• 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 they believe the downward trend to continue. The company expects that more investors will be attracted to property in Tokyo and the real estate market will continue to grow in the future.

Management Comments

• The company intends to acquire small pachinko hall operators and turn around the business by improving efficiency and providing additional financial support.
• The company intends to expand its business by opening new pachinko halls in areas where the population is increasing, or slowly declining.
• The company intends to continue renewing its existing pachinko halls as appropriate to provide customers with a more comfortable playing environment, improve customer attendance, and increase the company's overall profitability.
• The company believes it can generate stable rental revenue by leasing properties to Japanese commercial businesses such as electronics retailers, drugstores, and convenience stores.

Industry Context

The pachinko industry in Japan is experiencing a long-term downward trend in gross pay-in due to regulations and competition from other forms of entertainment. However, larger operators are gaining dominance as smaller halls struggle with capital expenditures. The real estate industry in Tokyo is experiencing a higher tenant vacancy rate due to COVID-19.

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, and Libera Gaming Operations is one of them.
• The document mentions that 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.
• The document mentions that the real estate industry market size was approximately 50 trillion (US$0.3301 trillion) in 2022, up 2.4% from the previous year.

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 common shares.
• Employees may benefit from the company's expansion plans and potential job creation.
• Customers may benefit from improved pachinko hall environments and new services.
• Suppliers may benefit from increased business opportunities due to the company's expansion plans.
• Creditors may be affected by the company's ability to repay its debts.

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 the offering to fund working capital and general corporate purposes, including investments, acquisitions, or strategic collaborations to expand its customer base, as well as the development and marketing of new services.
• The company intends to continue renewing its existing pachinko halls as appropriate to provide customers with a more comfortable playing environment, improve customer attendance, and increase the company's overall profitability.

Key Dates

Keywords

pachinko, pachislot, IPO, gaming, real estate, Japan, NYSE American, offering, Libera Gaming Operations, LBRJ