Far Eastern countries and cultures are generally renowned for their love of a good gamble. And of all the stock markets in the Far East, the Hong Kong Hang Seng Index is probably the best known and most respected on an international level. Many people see all world stock markets as a bit of a casino in their own right, so it makes your head spin a little when a gambling company from Japan plans an IPO on the Hong Kong market!
But that is exactly what Niraku Corp., the Fukushima-based Japanese operator of pachinko parlors, is planning to do. This looks like it will become Hong Kong’s first initial public offering (IPO) by any foreign company since last December.
What actually is pachinko?
So for the uninitiated, first things first, let’s find out what pachinko actually is and take it from there.
Pachinko is an incredibly popular game which gets round Japan’s gambling laws in a clever way. It is hugely popular in particular in the Land of the Rising Sun. It is, as a matter of fact, a mechanical game akin to a slot machine.
How to play pachinko
This exciting game utilises a lot of small balls and players firing these balls into the machine, which looks a lot like a pinball machine without any flipper hand controls. The balls then cascade down pins in a similar way to a bagatelle machine.
When balls find their way into certain slots, they can be captured. This, in turn, can trigger a sequence of events which causes more balls to be released. This is highly desirable to the player, because the overall idea is to get as many balls as you possibly can to be exchanged for prizes.
Where can you play pachinko?
Pachinko can be played in parlors, which can be found all over Japan. A number of parlors specialising in pachinko are owned and operated by the Niraku Corporation. And the fact that this company made total sales of 235,388 million Japanese Yen in its last full year (which is equivalent to more than $1,976m at the time of writing), just might give you the picture of how popular pachinko really is.
One of the main reasons pachinko is so well liked is the fact that it goes around the gambling rules in Japan.
Online gambling is also limited, but Japanese gamblers can find ways to navigate the restrictions. So large number of gamblers in Japan bet online with sites including Betway, 32Red, Unibet and others.
On some of these sites, you can also play a virtual version of pachinko. So pachinko isn’t simply a way around Japan’s gambling restrictions, people also love playing it in its own right. Otherwise, the Niraku Corp. wouldn’t be planning to do an IPO in Hong Kong where gambling is a lot easier.
More on Niraku Corp. and its future plans
Niraku Corp. was first founded in 1950. Today, it runs 54 pachinko parlors in Tokyo and the surrounding areas, along with additional parlors in the north-eastern prefectures of Miyagi and Fukushima. The company was adversely affected by the earthquake and resulting tsunami back in March 2011, but is clearly booming again now.
The company hope to raise around $100m from the IPO during the first half of 2015, according to reports on Bloomberg. However, the company are yet to formally appoint investment banks. As a matter of fact, they have not formally applied to the Hong Kong stock exchange for the permission to float.
Nevertheless, this seems very likely, because a number of the world’s largest casino operators are traded on the Hang Seng market. One of Niraku’s competitors, Dynam Japan Holdings Co., saw its shares rise by almost 50 per cent following its flotation on the Hong Kong market in an IPO which saw the company raise more than $200m. So Niraku Corp. may well prosper if it floats.
Future of gambling in Japan
Japan’s government is beginning to push for a limited legalisation of casino gambling before the Olympics, because such a move would help finance the games. But Japan’s legislative process isn’t famous for its speed and there are many in the country who wouldn’t welcome such a move
At the same time, though, pachinko parlor operators could adapt to be able to run casinos and would seem well placed to do so. This could therefore prove more of an opportunity than a threat.
All in all, it will be fascinating to see where all the chips fall in this giant game of casino. So perhaps pachinko itself is the best analogy here?