Matthews startup placing its bets on $27.6 million IPO
two-year-old Matthews company hopes to raise as much as $27.6 million in an initial public offering to finance further development, licensing and marketing of its fledgling electronic poker tables designed for casinos and card clubs.
In a filing with the Securities and Exchange Commission, PokerTek Inc. -- which made its first $12,000 in operating revenue just last month -- says it will issue 2 million shares of stock, plus up to 300,000 more shares for over allotment by underwriters, at a price
Its only customers so far are the casinos operated by the Seminole tribe in southern Florida.
Still, the companys electronic tables are doing very well, says Gary Bitner, spokesman for Seminole Hard Rock Hotels & Casinos. "The players most attracted to them are players who have learned on the Internet and new players."
The software-development company, which has 17 employees, has only one product now -- an electronic poker table at which up to 10 people can play Texas Hold Em.
The system deals the cards, displays them on private screens to the players and displays general information on a large screen in the center of the table. It also enables customers to set up accounts for betting and keeps statistical information on the games.
In its filings, PokerTek says the tables help clubs and casinos by cutting costs for dealers and by increasing the number of games that can be played each hour. That is key because, unlike most casino games, the players dont play against the house. The house makes its money from the rake -- the price charged for each hand played. So having more hands played per hour means more money for the house.
PokerTek installed one table on trial at the Seminole casino in Hollywood, Fla., in May. Bitner says three of the 48 tables in the casinos poker room are now electronic. The Seminole Hard Rock also has installed two electronic tables at its Tampa location and ordered one for its Immokalee casino.
Bitner says representatives from an Oklahoma tribe came to see the tables last month.
"They have trouble getting trained dealers in Oklahoma," he says. "That is an issue in more rural areas. They thought this is something that could probably work well for them there."
PokerTek executives did not return phone calls requesting interviews for this story. Under SEC regulations, a companys executives are limited in what they can say during a public offering.
But the IPO filing says the companys initial targets will be casinos on Indian reservations because the regulatory barriers are not as high in those locations as they are in the 11 states that allow casinos and card clubs off reservations.
The filing says PokerTek is negotiating with two more Native American tribes and is seeking certification by Gaming Laboratories International Inc., which would qualify the tables for use in the casinos of most of the 224 tribes that run gaming operations.
PokerTek leases its tables for $6,000 per month. It estimates it will take up to 24 months to gain regulatory approval to market the tables in states that allow casinos and card clubs.
The company was founded in August 2003 by Chief Executive Lou White, President James Crawford and director Lee Lomax. It had no revenue and spent $64,975 on research and development by Dec. 31, 2003, representing all its costs.
In 2004, it got a boost from WPT Enterprises Inc., a publicly traded company that operates the World Poker Tour and helped create the boom in poker with a cable television show.
WPT loaned PokerTek $185,000, payable in five years and, in return, took 1.08 million shares of the company. WPT also granted PokerTek a 10-year, royalty-free license to use the World Poker Tour name and logo in the sale and leasing of its tables.
Lyle Berman, executive chairman and former chief executives of WPT, is chairman of the PokerTek board.
In 2004, PokerTek posted a loss of $925,837 -- about half spent on research and development and half spent on selling, general and administrative costs. For the six months that ended June 30, the company lost $1.58 million -- about 60% of that in research and development and most the remainder on SG&A expenses.
After the offering, the company plans to trade on the Nasdaq National Market under the ticker symbol "PTEK." No underwriters are identified in the initial filing, and the date of the offering and exact price are to be spelled out in later filings.
2005-08-12
