Esports Entertainment Group sells Helix eSports to SCV Capital
Esports Entertainment Group sells Helix eSports to SCV Capital
Sharpr is a weekly newsletter covering the intersection of esports and betting
Hey everyone, Cody here.
According to an SEC filing, Esports Entertainment Group has made good on its promise to divest Helix eSports, reaching an agreement with SCV Capital to sell the asset for assumed liabilities. The deal will bring the company one step closer to the “asset-light” model it’s chasing, but not immediately resolve the company’s financial standing.
We dig into that and more in this week’s newsletter. Let’s jump right in.
In this week’s edition of Sharpr…
Esports Entertainment Group sells Helix eSports to SCV Capital
Overwatch 2 will remove the loot box system from the franchise
Esports betting excluded from Iowa gambling bill
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Esports Entertainment Group sells Helix eSports to SCV Capital
Esports Entertainment Group has sold its Helix eSports gaming centers and all associated IP to SCV Capital, LLC.
EEG will sell its two Helix eSports locations in North Bergen, NJ, and Foxborough, Mass. to SCV Capital for an amount equal to its “assumed liabilities.”
SCV Capital will assume all contractual obligations and liabilities of the asset from and after March 1, 2022.
The two parties also signed a licensing deal, granting EEG a non-exclusive right to continue using the Helix eSports IP for another six months as a transition period.
The agreement follows last month’s quarterly earnings report, detailing troubling monetization difficulties across EEG’s esports assets. After taking a $38.6M impairment charge in Q3 FY2022, the company revealed it was working to divest Helix eSports, the LAN gaming center business it acquired in June 2021 for roughly $43M.
EEG’s software and products, such as LANDuel and ggCircuit (which was acquired as part of its Helix deal), will not be included in the agreement.
Regulus Partners analyst Ollie Ring tells Sharpr that EEG’s pricey acquisition of Helix being written off as an impairment less than two years later tells a stark story.
“Esports Entertainment Group stock has failed to rally in months, and NASDAQ delisting is arguably looking inevitable. Acquiring everything 'esports' can work if the cogs and mechanisms to make a great esports company are understood. A spray-and-pray approach with .com casino operators, esports LAN venues, esports LAN companies, and a hard push on a New Jersey sportsbook for esports seem a conflated and confused idea that was never quite executed right.”
🦈 Sharpr Take: Recent months have spelled uncertainty for Esports Entertainment Group as its wrestled to find profitability and purpose.
EEG’s stock is down more than 96%, and faces delisting from the NASDAQ should it not be able to close its share price above $1.00 for ten consecutive days by Oct. 8.
The company’s esports betting platform VIE.gg has fallen radically short of revenue forecasts, generating $23 in gross revenue in April.
In the past month, the company has also seen its Chief Operations Officer Stuart Tilly and board member Mark Nielsen submit letters of resignation.
EEG is in the process of a fairly significant transitional period. Last month, CEO Grant Johnson said that the company would “dramatically simplify” its offering in esports and pursue an “asset-light model,” focusing on SaaS technology, in-person tournaments, and its peer-to-peer wagering platform.
Offloading Helix is a good step toward becoming a more lightweight outfit, but won’t solve all of its immediate challenges. EEG is now untangling itself from years of misguided bets, assuming a portfolio of esports companies that have failed to operate as synergistically as expected.
One of EEG’s greatest misjudgments has been the market for esports betting stateside, which has grievously underperformed from the $1-2M Johnson estimated VIE would generate in NJ in its first year. It’s unclear whether or not esports bookmaking will remain a priority for EEG moving forward–to abandon it now however would mean a lot of time, energy, and resources that have gone to waste.
It’s all-or-nothing for Esports Entertainment Group as it prioritizes rebuilding its cash balance in the near-term. It’ll be interesting to see where the company lands in its next financial reporting period and how the books start to shake out from this new approach.
🗞 In the news
Overwatch 2 will remove the loot box system from the franchise.
Esports betting was excluded from the final draft of Iowa’s gambling bill, noting it was a “contentious issue.”
GRID Esports has extended its data partnership with EMG and StarLadder.
📈 By the numbers
Ebet (formerly known as Esports Technologies) aims to raise $3.5M through a private placement.
The global gaming market is estimated to be worth $300B, and the average gamer spends 16 hours a week gaming.
The 31st Southeast Asian Games featuring Mobile Legends: Bang Bang courted more than 2.2M concurrent viewers.