Esports Entertainment Group up against the ropes as stock troubles rise
Sharpr is a weekly newsletter covering the intersection of esports and betting
Hi everyone, Cody here.
It’s been quite the week, and frankly one where I ask myself whether it’s a good thing or a bad thing to have too much content as opposed to too little. Happily I can say it’s net positive for my readers.
This week we dig into what Esports Entertainment Group is up against, a closer look at the now-enacted Twitch policy on gambling content, and an entire conference in Atlantic City dedicated to musings on the esports betting industry.
A lot of great material to dig into today–let’s dive right in 🏊
In this week’s edition of Sharpr…
Esports Entertainment Group up against the ropes as stock troubles rise
Twitch updates casino content policy, but guidance lacks bite
Esports betting headlines Atlantic City casino conference
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Esports Entertainment Group up against the ropes as stock troubles rise
Esports Entertainment Group is up against the financial ropes, facing a delisting from the NASDAQ in wake of its free falling share price.
On October 11, Esports Entertainment Group was notified that the company had failed to meet the minimum bid share price of $1.00 and would not be eligible for a second 180 day extension.
The company intends to submit an appeal to NASDAQ where it will present its plan to effectively increase the share price above the required minimum.
The betting operator also revealed that its notesholder has not yet opted to seek cash redemption, but doing so could spell serious trouble for the business. EEG agreed that the notesholder could redeem the full value of the notes in cash or in shares at market value, but the company may not be able to foot the bill.
The agreement outlines a floor price of $2.18 (a minimum price at which the notes can be converted into equity in the event of default), well below the currently traded price of $0.14 per share. In order to offset the discrepancy in price, EEG would need to issue a “make-whole” payment in cash to the notesholder which the company calculated would amount to $9.4M.
It was noted that a “strict application of the formula” to determine the make-whole provision could require EEG to pay up to $180M, whereas the company has only $2.6M remaining on its balance sheet.
Last week the company reported a year-over-year revenue increase in its FY22 Q4 results, but that figure represented a sequential decline of 25.4% from the $15.7M generated in the previous quarter. Losses were narrowed in other areas, contributing to a net loss of $4.1M compared to $4.8M the year prior in Q4 2021. EEG also completed the sale of its Helix eSports gaming centers for a total purchase consideration of $1.2M.
🦈 Sharpr Take: Matters are as grim as they’ve ever been for Esports Entertainment Group. The stock is down 98% YTD and a NASDAQ delisting looks almost certain at this point.
The issue relating to its notesholder perhaps poses a larger threat to the business, which would have to rely on a creditor to bail out a cash redemption.
Twitch updates casino content policy, but guidance lacks bite
Twitch has released its updated policy on prohibited casino content following a watershed moment in September which forced the streaming platform’s hand on what has been an ongoing and highly controversial subject for some time.
Effective October 18, Twitch will prohibit streaming of all blacklisted sites, starting with Stake, Duelbits, Roobet, and Rollbit.
Twitch noted it may prohibit additional sites that “contain slots, roulette, and dice games” as well as those that are unlicensed in the U.S. or other jurisdictions with consumer protections such as deposit limits, waiting periods, and KYC.
The policy update will span across all domain extensions of the named platforms, barring free-to-play variations of blacklisted sites.
Twitch will websites that focus on sports betting, fantasy sports, and poker at this time.
Twitch’s policy update is largely an echoed version of what the company revealed in a September 20 statement on the matter, and frankly, lacks the bite some thought the streaming juggernaut would come back with after a month of planning. In some ways, the loose guidance is likely all that Twitch could take on, alleviating itself of playing the role of a global regulator and instead leaning on its community to report bad actors in the space.
The now effective policy will have a material impact on the named sites and others like them that are forbidden from Twitch, both from the perspective of a downed advertising channel and a core consumer demographic that is now (hopefully) more educated on the importance of regulated betting.
It’s a net positive move from Twitch which will take the edge off surmounting pressure from its top creators and industry onlookers alike. An important message was also sent to black market operators attempting to capitalize on an impressionable audience with staged and manufactured winnings.
But again, Twitch’s greatest threat remains that underage viewers can and will still be exposed to gambling content and promotions on the platform, which, even in regulated markets, is still an issue in and of itself when the platform’s minimum age requirement is 14-years old.
Esports betting headlines Atlantic City casino conference
Esports betting advocates converged at Stockton University on Tuesday for the Casino Esports Conference, bringing up a number of topical discussions around the future of the market.
Hosted at Stockton’s newly opened Esports Innovation Center, industry supporters came together to discuss the space, many of which pointing to the opportunities from sportsbook to casinos in which esports may provide a fresh perspective and material benefit.
New Jersey Economic Development Authority CEO Tim Sullivan said the state was “poised to have a leadership position in this industry,” and described the sector as “the future of gaming and a big opportunity to add another piston to the Atlantic City and Atlantic County industry.”
G3 Esports CEO Anthony Gaud depicted a world in which users could wager online in games of Angry Birds instead of blackjack or poker. “There’s going to be a wagering angle, probably a large one,” he added. “It’s going to be a really big thing.”
Seth Schorr, chairman of Las Vegas’ Downtown Grand casino, insisted that the industry would need to concentrate on utilizing the correct channels to reach the gaming audience, namely online. “It’s good to fish where the fish are,” Schorr said. “They’re online, not in the casinos. Start online, get them into the database before you bring them into the casinos.”
🗞 In the news
RETAbet has reached a deal with Sports Information Services to utilize its esports betting product.
Luckbox partnered with Peruvian esports organization Thunder Awaken.
SportsGrid has launched sports betting coverage on AP video platforms.
📈 By the numbers
Annual sports betting handle will surpass $100 billion this year, according to the American Gaming Association.
DUX Gaming has courted a $2.95M funding round led by NBA champion Marc Gasol.