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Esports Entertainment Group (EEG) struggles amid falling stock price, paltry cash reserves and Official announcement on Wednesday Grant Johnson, CEO and chairman of the board, has left the company.
Jane Jones Blackhurst Appointed to the EEG Board of Directors in May, was appointed as the new Chairman of the Board of EEG. She is a former mayor of Las Vegas and currently sits on the board of Caesars Entertainment.
But as a sign of ongoing internal turmoil, the esports-focused Online Gambling Sites On Monday reporter Cody Longo Sharpr Substack Site.
EEG previously announced a debt default in May
The corporate restructuring is a further sign of EEG’s precarious financial position, a year after it desperately tried to raise cash by closing its gaming brand its stock value collapsed.
In May, EEG in its quarterly earnings report It has “serious doubts” about its ability to continue as a viable entity after defaulting on $35 million of convertible notes it issued in 2021.
But noteholders have so far opted not to collect their debt due to the company’s precarious financial position, which could put EEG in an unsustainable position.
possible lifeline in place
The EEG statement on Wednesday sought to allay such concerns:
“The company is in discussions with its debt holders to restructure its payment obligations, including, but not limited to, eliminating derivative liabilities in its consolidated balance and addressing the company’s default status under the debt,” reads the release. “The company is optimistic that a mutually beneficial agreement can be reached in the short term.”
The release also mentioned that it received a “non-binding letter of intent from a third party proposing to merge its assets, including intellectual property, with those of the company,” which would still focus on increasing esports Income, currently under consideration by EEG.
A key factor for EEG’s survival is its Spanish-facing business, which is expected to close on December 12 online casino entity. Proceeds from the sale, an undisclosed amount, will be used to pay the principal of the convertible notes.
iGaming asset fire sale under consideration
EEG further stated that it is considering selling its remaining iGaming assets due to “regulatory burdens and increased competition”.
Earlier in May, the EEG announced that it was Trying to stem its cash burn by selling off its esports assetsincluding Helix eSports (which it sold to SCV Capital in June for a price equivalent to its debt liabilities), ggCircuit and the Esports Gaming League.
The sale of the latter two assets has so far not materialized.
The bad news kept coming in October, however, when EEG announced it was unable to raise new funding.which forces it Closes its online sportsbook VIE.gg in less than a year After launching in New Jersey Early 2022, with great fanfare.
The venture proved to be an unmitigated disaster, as it grossly overestimated its ability to lure customers to its VIE.gg online platform after paying seven-figure “skin fees” to Bally’s Atlantic City Hotel and Casino. ability.
“E-sports is categorized [the] Same with sports.so the skin [costs] “Seven figures a year, that’s too much for esports at this stage,” Johnson, the then-CEO, said when the VIE closed. Then add sports betting. But when we got the approval, it became clear that the world had changed. “
Unlike upcoming operators BetFanatics and Betr, which will rely on a massive customer database to acquire customers at launch, while EEG has a much smaller convertible following among its gaming customers.
The company also lacks capital resources to cover the high cost of marketing and promotional expenditures, which may have given the VIE brand some paltry traction in a highly competitive market. New Jersey Sports betting market.
While announcing the closure of VIE.gg, Johnson also warned investors that EEG was already in jeopardy as far as its UK sports betting business was concerned.
“We are restructuring to maintain a more stable market,” Johnson said in October.[And] Currently, New Jersey, Spain and the United Kingdom are jurisdictions where we do not have the capital necessary to remain active. So we’re reducing cash burn and putting some cash in the bank. “
Then, in November, EEG‡, which operates the gaming, iGaming and B2B technology divisions, announced that its UK SportNation and RedZone sportsbook brands would close, citing “various reasons, including the economics of running a small iGaming business in the UK market”
EEG narrowly avoids delisting from Nasdaq
Before confirming its CEO’s departure, EEG announced earlier this week that it had Avoid delisting from the Nasdaq exchange where its shares are traded.
The company was given a two-month grace period from Nasdaq to allow the struggling operator to raise more capital and boost shares that have plunged this week.
After reaching a high of $21 a share in March 2021, EEG stock was trading near a 52-week low of 11 cents a share on Nasdaq on Thursday, giving it a market capitalization of about $7.6 million.
Under the terms of the arrangement with the exchange, EEG must increase its share price nearly 10 times and reach a minimum bid price of $1.00 per share for 10 consecutive days in order to remain listed on the exchange.
That goal will prove elusive unless EEG finds a corporate rescuer or existing stakeholder willing to inject new capital into its sinking business, reassuring investors that the company will have enough cash to last through the coming year.
Additionally, the operator has until March 31 to demonstrate that it has at least $2.5 million in shareholder equity.
Will esports-focused books follow other niche operators in saying “No Mas”?
With the withdrawal of Fubo and MaximBet from the US legal sports betting market, EEG’s imminent exit from the iGaming space could be a clear sign that many smaller/niche players will soon follow suit.
The sharp rise in interest rates has put more pressure on smaller operators who do not have the overall capital resources that allow large sportsbooks to have — fan duel, draft king, Betting on MGMand Caesar — Funding large promotions while remaining unprofitable.
Only FanDuel’s sportsbook is currently profitable, while the others hope to hit the all-important “inflection point” later in 2023. The closure/sale of EEG’s sports betting and gaming operations suggests that it may no longer be viable for these companies to compete for 1% market share in much of the U.S. market.
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