F-1/A: Libera Gaming Operations Files Amendment for Initial Public Offering, Seeks NYSE American or Nasdaq Listing

Libera Gaming Operations, a Japanese pachinko hall operator, has filed an amendment to its registration statement for an initial public offering, aiming to list on either the NYSE American or Nasdaq.

Summary

• Libera Gaming Operations, a pachinko hall operator in Japan, is seeking to go public with an initial offering of 1,250,000 common shares, with an expected price between US$4.00 and US$6.00 per share.
• The company intends to list its shares on either the NYSE American or the Nasdaq under the symbol LBRJ.
• Libera has been operating pachinko halls for over 59 years and currently operates eleven halls in Japan.
• The company also engages in real estate development, leasing, and brokerage, primarily in the central Tokyo area.
• For the year ended October 31, 2023, Libera reported total revenues of 6,106,306 thousand (US$38,761 thousand) and net income of 557,802 thousand (US$3,541 thousand).
• For the six months ended April 30, 2024, the company reported total revenues of 3,028,688 thousand (US$19,225 thousand) and net income of 70,117 thousand (US$445 thousand).
• The company's CEO, Toyotaka Nagamori, currently owns 63.6% of the voting power and will control approximately 57.0% after the offering.
• Libera is considered an emerging growth company and a foreign private issuer, which allows for reduced reporting requirements.
• The company experienced a fire at one of its pachinko halls in January 2024, resulting in losses of 121,372 thousand (US$770 thousand) and estimated repair costs of 480 million (US$3.0468 million).

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the company has a long history and a diversified business model, it faces significant challenges in a declining market and has experienced a recent fire incident. The company is also seeking to raise capital through an IPO, which could be seen as a positive or negative depending on the investor's perspective.

Positives

• Libera has a long history of over 59 years in the pachinko industry.
• The company is one of the largest pachinko hall operators in Japan, operating eleven halls.
• Libera has a diversified business model with both pachinko and real estate operations.
• The company has shown revenue growth in its pachinko operations.
• Libera has a strategy to acquire smaller pachinko halls and improve their profitability.
• The company is expanding its real estate business in central Tokyo, which is expected to be profitable.
• Libera has a strong network of relationships with financial institutions, machine sellers, and real estate companies.

Negatives

• The pachinko industry in Japan is experiencing a long-term downward trend in gross pay-in.
• The company experienced a fire at one of its pachinko halls, resulting in significant losses and repair costs.
• Libera relies on a small number of large customers for its real estate business, which could affect revenues if these customers are unable to make payments.
• The company relies on a small number of suppliers for its pachinko operations, which could affect its business if there are supply chain issues.
• The company is subject to various risks related to its real estate development projects, including delays, increased costs, and labor shortages.
• The company is subject to various risks related to its pachinko operations, including changes in regulations, competition, and economic downturns.

Risks

• The company's ability to raise capital in the future may be limited.
• Public health epidemics or outbreaks could adversely impact the business.
• Supply chain disruptions and inflationary pressures could have a material adverse effect.
• The pachinko business is sensitive to reductions in consumer discretionary spending.
• A long-term downward trend in the pachinko market could adversely affect operations.
• The company may not be able to renew leases or obtain desirable sites for expansion.
• Rising operating costs could negatively impact the business.
• The company's pachinko and pachislot game hold percentages may fluctuate.
• 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 company has historically relied on certain suppliers, and delays or difficulties in securing supplies could have a material adverse effect.
• The trading of the company's common shares could experience extreme stock price volatility.

Future Outlook

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

Management Comments

• The company intends to acquire smaller 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 through acquisitions in areas where the number of machines installed is small relative to the surrounding population.
• The company intends to continue renewing its existing pachinko halls as appropriate to provide customers with a more comfortable playing environment.
• The company intends to purchase old properties and redevelop or renovate them through third-party contractors in areas where the population is increasing, or slowly declining, and where we believe rents and asset values are unlikely to decline.

Industry Context

The pachinko industry in Japan is facing a long-term downward trend in gross pay-in due to regulations and competition from other forms of entertainment. However, large operators like Libera are expected to benefit from this trend as smaller operators are pushed out of the market. The real estate market in Tokyo is expected to grow, providing opportunities for Libera's real estate business.

Comparison to Industry Standards

• Libera is one of the largest pachinko hall operators in Japan, operating eleven halls, while only 161 operators operate more than ten halls out of a total of 1,623 operators.
• The pachinko industry in Japan has seen a decline in gross pay-in from approximately 21.4 trillion in 2017 to approximately 14.6 trillion in 2021, indicating a challenging market environment.
• The number of pachinko halls has been on a long-term downward trend, with smaller operators being pushed out of the market, which favors larger operators like Libera.
• The real estate market in Tokyo is experiencing a higher tenant vacancy rate of 6.33% in 2021 compared to 1.55% in 2019, indicating a potential risk for Libera's real estate business.
• The pachinko market size in Japan was worth 14.6 trillion in 2022, unchanged from the previous year, indicating a stagnant market.

Related Party Transactions

• The company has entered into operating lease agreements with its CEO.
• The company has borrowed money from its CEO and his family members.
• The company has sold real estate properties to a company controlled by its CFO.

Stakeholder Impact

• Shareholders will be subject to dilution from the issuance of new shares in the IPO.
• Employees may benefit from the company's growth and expansion plans.
• Customers may benefit from improved pachinko hall facilities and services.
• Suppliers may benefit from increased business with the company.
• Creditors may be affected by the company's debt levels and ability to repay loans.

Next Steps

• The company intends to list its shares on either the NYSE American or the Nasdaq 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 its customer base, as well as the development and marketing of new services.
• The company is exploring various business opportunities for Libera Hotels & Resorts, Inc., but has not yet commenced any specific business opportunity.
• The company expects that Libera Hotels & Resorts, Inc. will start hotel and spa business within the next 12 months by renovating the old spa resort donated from the government of Iwate Prefecture upon receipt of the necessary governmental approval.

Key Dates

Keywords

pachinko, pachislot, real estate, Japan, IPO, gaming, Tokyo, initial public offering, NYSE American, Nasdaq, acquisition, development, leasing, brokerage