Nasdaq-listed Entertainment Gaming Asia Inc said it expects about US$15 million in proceeds from the rights offering it is proposing to shareholders.
The company is planning a subscription rights issue for an aggregate of up to 27,777,673 shares of its common stock at US$0.54 per unit. Holders of the firm’s common stock will receive 0.92278 non-transferable subscription rights for every one share of common stock owned as of September 15, Entertainment Gaming Asia said in a filing to the U.S. Securities and Exchange Commission on Wednesday.
The shares closed up 3.7 percent in New York on Wednesday at US$0.55 a unit.
“We are undertaking the present rights offering for purposes of funding additional casinos and gaming clubs, expanding our slot participation operations as well as for general working capital for the gaming products operations,” the company said in the statement.
The company said it is “currently conducting a survey and analysis of potential projects and have commenced preliminary discussions with third parties with regard to certain such gaming projects”. It did not provide details.
Entertainment Gaming Asia, linked to Hong Kong-listed casino investor Melco International Development Ltd, is a gaming company focused on the emerging gaming markets of Asia. It operates slot machines on a participation basis and also supplies gaming chips and plaques to casinos. It currently operates one property in northwestern Cambodia in the province of Banteay Meanchey, Dreamworld Club Poipet (pictured).
Melco International, through its subsidiary EGT Entertainment Holding Ltd, controls 38 percent of the issued share capital of Entertainment Gaming Asia.
If EGT Entertainment fully exercises its basic subscription right and other stockholders do not, it will increase its percentage ownership to an amount as high as 54.1 percent. The stake can go up to 67.7 percent depending on the oversubscription privilege.
Entertainment Gaming Asia has a history of operating losses and it says it “may continue to incur losses for the foreseeable future”. For the six-month period ended June 30, the firm posted net losses from continuing operations of nearly US$657,000.
In Wednesday’s SEC filing, the company warned of its dependence on NagaWorld, saying that the termination or expiration of that relationship would have “a significant negative impact” on its financial performance. NagaWorld, operated by NagaCorp Ltd, is Cambodia’s largest casino complex and the only in capital Phnom Pehn.
Entertainment Gaming Asia also said it could require additional funding in the future to execute casino and gaming development plans, including committing to a large development project or the concurrent development of multiple casino and gaming projects. As of June 30, the firm said it had working capital of approximately US$5.8 million.
If unsuccessful in raising the cash through the rights offering, the firm said it might consider other forms of fund raising, including equity sales and debt financing.
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”Assuming that our [Tigre de Cristal] phase two project and the other future operators’ development plans remain on track, we may see the benefits of a ‘cluster’ effect [in the Primorye Integrated Entertainment Zone] as early as 2021”
Summit Ascent, lead developer of Tigre de Cristal