At the beginning of the week, it was revealed that Universal Entertainment Group is now seriously in the hunt for a special acquisition company (SPAC) it could partner with to take Okada Manila public in the U.S. It’s an idea the company has been tossing around for about three years, and Universal believes the time is right to move forward with an initial public offering (IPO). It isn’t alone, as Smartkarma Innovations, an independent investment research group, agrees, saying that the concept should be attractive to investors.
Singapore-based Smartkarma’s Howard Klein gave his thoughts on the proposed IPO yesterday, supporting the growing interest of gaming entities to turn to SPACs in order to make it to public trading markets, such as NASDAQ or the New York Stock Exchange (NYSE) in the U.S., as well as others around the world. He feels that the attention given these types of arrangements has already proven to be lucrative, explaining, “Given the recent track record of [SPAC] IPOs rocketing market caps soon after IPO issuance, the move by Universal will present an attractive offer to investors.”
Universal, which owns Okada Manila through its Tiger Resort, Leisure and Entertainment company, has reportedly already begun the process to land a dedicated SPAC, but hasn’t yet announced a potential candidate. However, as soon as something can be arranged, the company wants to go public in order to raise capital for expansion and to achieve “greater corporate value.” First, though, it will have to overcome the issues brought about by COVID-19.
Universal’s fiscal year 2020 performance wasn’t great; some might even say it was disastrous. The company reported a net loss of $181.8 million, which was about three and a half times the $49.12 million loss it saw in the prior year. Okada Manila was hit even harder, reporting a loss of $85 million for the most recent fiscal year. As a result, the casino made a number of significant cuts in order to save money, according to a recent filing.
Still, there is significant opportunity for a rebound, according to Klein. He says the risk of any IPO is low for investors, adding, “The sponsor is Universal [Entertainment]…, a firmly-established licensed casino operator in a robust market coming out of a [COVID-19] pandemic-induced torpor. The prospects for a successful launch of Okada Manila as a public traded Nasdaq company are solid. Okada Manila is a well-established, fully financed player with a genuine moat in the Manila gaming market it shares with only three other properties in the city’s Entertainment Zone.”