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A Quick Take On SYLA Technologies

SYLA Technologies (SYT) has filed to raise $15 million in gross proceeds from the sale of ADSs representing its common stock in an IPO, according to an amended registration statement.

The company provides investors interested in Japanese real estate with an online platform for reviewing and investing in properties there.

I’ve grown increasingly skeptical of Asia-based companies seeking U.S. public capital market investment at sub-$10.00 per share IPO prices with low stock floats, as these IPOs tend to target retail investors, have seen high volatility and have produced little positive results for investors post-IPO.

I’m on Hold for SYT’s IPO.


Tokyo, Japan-based SYLA Technologies Co., Ltd. was founded to develop multiple investment platforms for various investors in real property in Japan.

Management is headed by co-president and CEO Hiroyuki Sugimoto, who has been with the firm since March 2017.

The company’s primary offerings include:

  • Individual asset investment & management

  • Corporate and institutional asset investment & management

  • Other leasing, management, brokerage and crypto activities

As of June 30, 2022, SYLA has booked fair market value investment of $21.1 million from investors including SY Co., Ltd. and RightNow Co.

Client Acquisition

The firm seeks to create online marketplaces where individuals and institutional investors may conduct real estate investment transactions online, pursuant to a recently-enacted Japanese law allowing such activity.

SYLA has created a real estate crowdfunding platform for individuals and institutions to lower the barriers to entry for real estate investing while providing indirect financial functions to real estate companies via the platform.

The company has over 180,000 registered members.

Selling, G&A expenses as a percentage of total revenue have varied slightly as revenues have increased, as the figures below indicate:

Selling, G&A

Expenses vs. Revenue



Six Mos. Ended June 30, 2022






(Source – SEC)

The Selling, G&A efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling, G&A spend, rose to 1.9x in the most recent reporting period, as shown in the table below:

Selling, G&A

Efficiency Rate



Six Mos. Ended June 30, 2022




(Source – SEC)

Market & Competition

According to a 2022 market research report by Plaza Homes, the Japanese market for residential real estate has remained robust despite the pandemic, due to a ‘flight to safety’ by investors.

The main drivers for this expected growth are real estate transaction volumes have dropped in Osaka and Yokohama, while Tokyo and Nagoya have fared better.

The market research firm expects that the real estate market in Japan will remain strong in the coming years, driven by two main factors.

Firstly, the population is expected to continue to grow, especially in the capital city of Tokyo.

Secondly, the Japanese economy is forecast to rebound in the second half of 2022.

Also, companies are transitioning slowly to a ‘hybrid’ work environment, but existing norms of working at the office remain more entrenched than in other developed nations.

This has increased demand for apartments close to major business districts.

To take advantage of this expected growth, foreign investors can invest in Japanese real estate through a New-Type Entity (NTE).

An NTE is a Japanese corporation that is 100% foreign-owned and which is exempt from many of the restrictions that apply to foreign companies investing in the country.

Demand for larger footprint residential property is growing, to accommodate a growing need for home office area amid increasing time spent at home by families.

The rise in e-commerce is also benefiting the industrial and logistics property sector in Japan.

The real estate crowdfunding market is highly fragmented, with over 250 companies as of July 31, 2022. Management says its firm is the largest in terms of number of members, as determined by a company-sponsored research report.

The report, ‘The Top Five Real Estate Crowdfunding Platforms in Japan’, was released on August 1, 2022 by the Tokyo-based market research firm, Tokyo Kantei.

According to the report, Tokyoreit is the largest platform in terms of the number of projects listed, with 1,160 projects.

Financial Performance

The company’s recent financial results can be summarized as follows:

  • Growing topline revenue

  • Increasing gross profit

  • Reduced gross margin

  • Dropping operating profit

  • A swing to cash used in operations

Below are relevant financial results derived from the firm’s registration statement:

Total Revenue


Total Revenue

% Variance vs. Prior

Six Mos. Ended June 30, 2022

$ 62,974,636



$ 118,324,212



$ 93,295,250

Gross Profit (Loss)


Gross Profit (Loss)

% Variance vs. Prior

Six Mos. Ended June 30, 2022

$ 10,916,754



$ 22,358,532



$ 19,980,614

Gross Margin


Gross Margin

Six Mos. Ended June 30, 2022






Operating Profit (Loss)


Operating Profit (Loss)

Operating Margin

Six Mos. Ended June 30, 2022

$ 1,988,916



$ 4,844,742



$ 6,307,818


Net Income (Loss)


Net Income (Loss)

Net Margin

Six Mos. Ended June 30, 2022

$ 1,061,883



$ 1,978,685



$ 3,093,662


Cash Flow From Operations


Cash Flow From Operations

Six Mos. Ended June 30, 2022

$ (18,129,034)


$ 178,196


$ 1,910,198

(Glossary Of Terms)

(Source – SEC)

As of June 30, 2022, SYLA had $12.1 million in cash and $144.7 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2022, was negative ($33.3 million).

IPO Details

SYT intends to sell 1.875 million ADSs at a proposed price of $8.00 per ADS for gross proceeds of approximately $15.0 million, not including the sale of customary underwriter options.

No existing or potentially new shareholders have indicated an interest in purchasing shares at the IPO price.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO (excluding underwriter options) would approximate $292 million.

The float to outstanding shares ratio (excluding underwriter options) will be approximately 7.26%. A figure under 10% is generally considered a ‘low float’ stock which can be subject to significant price volatility.

Per the firm’s most recent regulatory filing, it plans to use the net proceeds as follows:

We intend to use the net proceeds from this offering for working capital and general corporate purposes, which may include investments, acquisitions, or strategic collaborations to expand our customer base, as well as the development and marketing of new services.

(Source – SEC)

Management’s presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says the firm is not a party to any legal proceedings that would have a material adverse effect on its financial condition or operations.

The sole listed bookrunner of the IPO is Boustead Securities.

Valuation Metrics For SYLA Technologies

Below is a table of the firm’s relevant capitalization and valuation metrics at IPO, excluding the effects of underwriter options:

Measure [TTM]


Market Capitalization at IPO


Enterprise Value


Price / Sales


EV / Revenue




Earnings Per Share


Operating Margin


Net Margin


Float To Outstanding Shares Ratio


Proposed IPO Midpoint Price per Share


Net Free Cash Flow


Free Cash Flow Yield Per Share


Debt / EBITDA Multiple


CapEx Ratio


Revenue Growth Rate


(Glossary Of Terms)

(Source – SEC)

The Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.

SYT’s most recent Rule of 40 calculation was 40% as of Q2 2022, so the firm has performed well in this regard, per the table below:

Rule of 40


Recent Rev. Growth %






(Source – SEC)

Commentary About SYLA Technologies

SYT is seeking U.S. public capital market funding to invest in its general, unspecified corporate growth initiatives.

The company’s financials have produced increasing topline revenue, growing gross profit, lowered gross margin, reduced operating profit and a swing to cash used in operations.

Free cash flow for the twelve months ended June 30, 2022, was a very hefty negative ($33.3 million).

Selling, G&A expenses as a percentage of total revenue have varied as revenue has grown; its Selling, G&A efficiency multiple rose to 1.9x in the most recent reporting period.

The firm currently plans to pay dividends, if any, based on the sole discretion of its Board of Directors. The company has a history of paying dividends each year going back to 2013.

The company’s trailing twelve-month CapEx Ratio was negative (1.73), which indicates it has spent heavily on capital expenditures even as it generated operating cash use.

The market opportunity for providing real estate investment opportunities in Japan via online sourcing is large and has recently received the benefit of favorable legislation, so the company has positive industry growth dynamics in its favor.

Boustead Securities is the lead underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (72%) since their IPO. This is a bottom-tier performance for all significant underwriters during the period.

Risks to the company’s outlook as a public company include the uncertain future of real estate property value growth in Japan due to slowing macroeconomic conditions and the company’s sharp turn to the use of a large amount of cash in operations.

I’m on Hold for SYT’s IPO.

Expected IPO Pricing Date: To be announced.


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