TIDMGFIN
RNS Number : 4556F
Gfinity PLC
15 July 2019
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
15 July 2019
Gfinity PLC
("Gfinity" or the "Company")
Proposed Placing to raise GBP5.25 million and notice of General
Meeting
Gfinity plc (AIM: GFIN), a world leading esports solutions
provider, announces a proposed subscription and placing of
116,666,666 new ordinary shares of 0.1p each in the Company at a
price of 4.5 pence per share to raise GBP5,250,000 before
expenses.
Highlights
-- Proposed placing oversubscribed following strong demand from both new and existing investors
-- Placing follows period of strong growth, under new
leadership, with the Company expecting to slightly exceed market
expectations of revenue and Adjusted EBITDA for the year to 30 June
2019
-- Net proceeds will provide capital for further growth and to
strengthen commercial capability, enabling the Company to take
advantage of a leading position it has created in the fast growing
esports sector
-- The Placing Shares will represent approximately 24 per cent
of the issued share capital of the Company as enlarged by the issue
of the Placing Shares
Defined terms used in this announcement are set out at the end
of this announcement.
Introduction
The Company is pleased to announce that it proposes to raise
GBP5.25 million (before expenses) by way of a placing of and
subscription for the Placing Shares at 4.5 pence per Placing
Share.
The allotment of the Placing Shares is conditional, inter alia,
upon the Company obtaining approval of shareholders of the
Resolutions to be proposed at a General Meeting to provide
sufficient authority to enable the allotment of the Placing Shares
and disapply statutory pre-emption rights which would otherwise
apply to the allotment of the Placing Shares.
Accordingly, the Company is seeking the approval of Shareholders
to the Resolutions which are to be put to the General Meeting of
the Company to be held at Gfinity Arena at Vue Cinema, Fulham
Broadway Retail Centre, Fulham Road, London SW6 1BW at 10.00 a.m.
on 31 July 2019. If the Resolutions are not passed by Shareholders
at the General Meeting, the Placing as currently envisaged will not
proceed. The Company is posting a circular to shareholders today
(and which will be available on the Company's website later today),
the purpose of which is to explain to Shareholders the background
to and reasons for the Placing and to seek their approval of the
resolutions to be proposed at the General Meeting of the Company to
be held on 31 July 2019.
The Placing Shares to be issued pursuant to the Placing are to
be admitted to trading on AIM, which, should the Resolutions be
passed at the General Meeting, is expected to take place on 1
August 2019.
Business and strategy overview
Gfinity is a leading international esports solutions provider,
with an expert understanding of the rapidly growing esports
community. It uses its expertise to provide both advisory services
and to design, develop and deliver unparalleled experiences and
winning strategies for game publishers, sports rights holder,
commercial partners and media companies.
The target addressable esports market continues to grow rapidly
and is forecast to reach $1.65 billion in revenues by 2021 (Newzoo:
2018 Global Esports Market Report). The Directors believe that
Gfinity is in a unique position to leverage its strong partnerships
to design, develop and deliver end-to-end esports solutions
targeting the world's 2.2 billion gamers.
Over the next few years, the Company expects to be able to drive
significant revenue growth across its partnership led managed
service business and wholly owned or partly owned solutions. These
solutions and service offerings are as follows:
-- Managed Services: advise on and design, develop and deliver
long term esports solutions, content creation and distribution
services for a variety of publishers, rights holders and
brands.
-- Owned and Operated Solutions: partnership driven esports
solutions, content and community development and management, based
on owned or partly owned formats, leagues, events and a digital
"Tribe" community.
In Managed Services, the Company has a strong pipeline of
opportunities with a number of publishers, rights holders and
brands. Through a partnership model with increased commercial
rights, monetisation is evolving quickly from a fixed service
provision retained model to a revenue and profit-sharing model. The
partnership model includes direct monetisation through media
rights, sponsorship, advertising and other revenue streams such as
tickets, merchandise, virtual items and subscriptions.
In Owned and Operated Solutions, Gfinity has refocused the
business to a strict partnership model. This has significantly
reduced losses and improved the operational dynamics and financial
upside through the reprioritisation of resources
Gfinity's strong competitive position and future revenue
opportunities are supported by its proprietary, scalable and
flexible tournament platform, consumer insight and community
building capability, holistic solution development, world class
production and long-term value creation.
Current trading and prospects
Following the introduction of a new executive leadership team,
from May 2018 onwards, the Company has refocused resources to the
areas driving the greatest commercial performance, in particular in
growing its commercial and account management capability. This
enhanced focus, including an emphasis on strategic account
management and the development of strategic partnerships, has
delivered strong growth at both a revenue and Adjusted EBITDA
level, which are expected to slightly exceed market expectations
for the year to 30 June 2019. This encouraging performance has been
driven by:
-- Growth in existing strategic partnerships, highlighting the
Company's position as one of the world leaders in the esports and
competitive gaming sector:
o Activision Blizzard: appointed to host Call of Duty World
League: London at the Copper Box Arena
o EA Sports: hosted five events as part of EA SPORTS FIFA 19
Global Series
o Formula 1: completed Seasons 1 and 2 of the Formula 1 Esports
Series and re-appointed for Season 3.
-- New strategic partners, further demonstrating the Company's
growing reputation as a provider of unique esports solutions:
o Premier League: appointed Tournament Operator of the inaugural
ePremier League
o TRUXTUN Capital: entered into partnership to be the primary
consulting and programme management partner for the Esports Wega
World Cup 2022
o HP Omen: selected as production partner for season 2 of the
television series, The Esports Report.
As a result, Gfinity has continued to deliver improved gross
margins, particularly through advisory services assignments for
sports rights holders and commercial brands in collaboration with
publishers and distribution partners.
In addition, the Company has refocused and added resources to
boost the Company's commercial capability which has led to a
significant increase in the pipeline of opportunities. Accordingly,
Gfinity has continued to invest in its esports technology platform,
its content creation capability and community building expertise,
meaning the Company has a significantly improved platform and
overall offering from which it can take advantage of the growing
popularity of esports.
Financial outlook
The Company reiterates its target of achieving Adjusted EBITDA
break-even by 2021. Revenue is expected to be driven by significant
increased activity in managed services and wholly and part owned
and operated solutions. Annual operating expenditure is expected to
reach and remain relatively stable around GBP10-12 million in the
medium term, as the majority of investment in the esport solutions
platform, commercial delivery capability and content production is
completed. Increasing value of esports content through a growing
audience along with stable operating expenditure is expected to
drive material operational scalability. As such, the Company
targets a long-term group gross margin of 30-40% and an Adjusted
EBITDA margin in the range of 15-25% on a normalised basis.
Reasons for the Placing and use of proceeds
Pursuant to the Placing, the Company will receive net proceeds
of approximately GBP5 million. The net funds from the Placing will
enable Gfinity to strengthen its platform for growth and enable
continued investment in its strategic priorities. The net Placing
funds will be used for the following purposes:
-- growth capital and strengthening of commercial capability,
including the addition of client management and business
development expertise to deliver on immediate commercial
opportunities and growing business pipeline;
-- to strengthen the balance sheet to position the Company for
potential strategic opportunities, particularly in the rights
ownership space; and
-- further strengthening of technology, particularly in content
development and community building capability.
Details of the Placing and Admission
The Placing will result in the issue of a total of 116,666,666
Placing Shares, representing, in aggregate, approximately 24.3 per
cent. of the issued share capital of the Company as enlarged by the
issue of the Placing Shares. The Placing Shares, when issued and
fully paid, will rank pari passu in all respects with the existing
ordinary shares of 0.1p each of the Company in issue and therefore
will rank equally for all dividends or other distributions
declared, made or paid after the issue of the Placing Shares on
Admission.
The Issue Price of 4.5 pence approximately represents a 31 per
cent. discount to the closing middle market price of an ordinary
share of 6.5 pence on 12 July 2019, being the latest practicable
date prior to the announcement of the Placing.
Application will be made to London Stock Exchange for the
Placing Shares to be admitted to trading on AIM and such admission
is expected to occur on 1 August 2019, subject to approval of the
Resolutions.
Allenby Capital and Pareto have entered into the Placing
Agreement with the Company under which Allenby Capital and Pareto
have each, on the terms and subject to the conditions set out
therein (including Admission), undertaken to use their respective
reasonable endeavours to procure subscribers for 32,477,778 Placing
Shares at the Issue Price. A further 84,188,888 Placing Shares are
being subscribed for directly with the Company, conditional, inter
alia, on Admission. The Placing Agreement contains certain
warranties and indemnities from the Company in favour of Allenby
Capital and Pareto. The Placing is not being underwritten by
Allenby Capital, Pareto or any other person.
The Placing is conditional, inter alia, upon the passing of the
Resolutions and Admission and the Placing Agreement not being
terminated prior to Admission (and in any event no later than 15
August 2019).
Significant shareholder and Director subscriptions
Details of the subscriptions by Directors in the Placing at the
Issue Price and their resultant shareholdings on Admission are as
follows:
Name Placing Shares Ordinary shares Percentage held
being subscribed on Admission of enlarged share
capital on Admission
Garry Cook 333,334 2,324,075 0.48%
Graham Wallace 222,222 534,722 0.11%
Jonathan Hall 222,222 222,222 0.05%
John Clarke 222,222 222,222 0.05%
Preeti Mardia 111,112 111,112 0.02%
The subscriptions by Garry Cook, Graham Wallace, Jonathan Hall,
John Clarke and Preet Mardia in the Placing are, in aggregate,
deemed to be related party transactions pursuant to rule 13 of the
AIM Rules for Companies. Accordingly, the Independent Directors
consider, having consulted with the Company's nominated adviser,
Allenby Capital, that the terms of subscription to the Placing
Shares by Garry Cook, Graham Wallace, Jonathan Hall, John Clarke
and Preeti Mardia are fair and reasonable insofar as Shareholders
are concerned.
Assuming completion of the Placing, the Company is aware of the
following persons that will be interested in three per cent. or
more of the issued share capital of the Company on Admission:
Name Ordinary shares Ordinary shares Percentage of enlarged
currently held on Admission share capital on
Admission
Charles Street International
Holdings Ltd 107,644,444 113,200,000 23.60%
Nigel Wray 32,048,325 35,381,659 7.38%
Alden AS 14,210,648 17,543,980 3.66%
Neville Upton 14,877,245 14,877,245 3.10%
Charles Street International Holdings Limited ("Charles Street")
is subscribing for 5,555,556 Placing Shares at the Issue Price and
as Charles Street currently holds more than 10 per cent. of the
Ordinary Shares, the subscription by it of Placing Shares is deemed
to be a related party transaction pursuant to rule 13 of the AIM
Rules for Companies. Accordingly, the Independent Directors
consider, having consulted with the Company's nominated adviser,
Allenby Capital, that the terms of subscription to the Placing
Shares by Charles Street are fair and reasonable insofar as
Shareholders are concerned.
Action to be taken by Shareholders
In order for the Placing to proceed, Shareholders will need to
approve both of the Resolutions set out in the Notice of General
Meeting. If the Resolutions are not passed at the General Meeting,
the Placing will not proceed in the form currently envisaged, with
the result that the anticipated net proceeds of the Placing will
not become available to fund proposed upcoming expenditure and
achieve the objectives set by the Board and the Company's business
plans, growth prospects and available working capital may be
materially adversely affected as a result.
Accordingly, it is important that Shareholders vote in favour of
the Resolutions, in order that the Placing can proceed.
Directors' Recommendation
The Board of Gfinity considers the Placing to be in the best
interests of the Company and its shareholders as a whole and
therefore the Directors unanimously recommend that shareholders
vote in favour of the Resolutions as they intend to do in respect
of their own shareholdings of, in aggregate, 17,180,486 Ordinary
Shares (representing approximately 4.73 per cent. of the Company's
existing issued share capital).
Total Voting Rights
On Admission, the Company will have 479,563,753 ordinary shares
of 0.1p each in issue, each with one voting right. There are no
shares held in treasury. Therefore, the Company's total number of
ordinary shares and voting rights is 479,563,753.
The above figure of 479,563,753 may be used by shareholders from
Admission as the denominator for the calculations by which they
will determine if they are required to notify their interest in, or
a change to their interest in, the Company under the FCA's
Disclosure Guidance and Transparency Rules.
Enquiries:
Gfinity plc
John Clarke john.clarke@gfinity.net
Teneo (media) 020 7260 2700
Camilla Cunningham gfinity@teneo.com
Allenby Capital Limited (Nominated Adviser
& Joint Broker) 020 3328 5656
Jeremy Porter / Nicholas Chambers
Shore Capital (Joint Broker) 020 7408 4090
Patrick Castle / James Thomas
About Gfinity
Gfinity (AIM: GFIN) is a world leading esports business. Created
by gamers for the world's 2.2 billion gamers, Gfinity has a unique
understanding of this fast-growing global community. It uses this
expertise to provide both advisory services and to design, develop
and deliver unparalleled experiences and winning strategies for
game publishers, sports rights holders, commercial partners and
media companies.
Gfinity connects its partners with the esports community in
authentic and innovative ways. This consists of on and off-line
competitions and industry leading content production. Partnerships
include EA SPORTS, Premier League, F1 Esports Series, Activision
Blizzard and the Forza Racing Championship.
Gfinity connects directly with competitive gaming consumers
through its owned competition platform, the "Gfinity Elite Series".
The Series enables esport teams and professionals to compete across
a number of different game titles, using innovative formats. The
series is broadcast through linear and digital channels and enjoyed
by tens of millions of esports fans around the world.
All Gfinity services are underpinned by the Company's
proprietary technology platform delivering a level playing field
for all competitors and supporting scalable multi-format leagues,
ladders and knock out competitions.
Information to Distributors
Solely for the purposes of the product governance requirements
contained within: (a) EU Directive 2014/65/EU on markets in
financial instruments, as amended ("MiFID II"); (b) Articles 9 and
10 of Commission Delegated Directive (EU) 2017/593 supplementing
MiFID II; and (c) local implementing measures (together, the
"Product Governance Requirements"), and disclaiming all and any
liability, whether arising in tort, contract or otherwise, which
any "manufacturer" (for the purposes of the Product Governance
Requirements) may otherwise have with respect thereto, the Placing
Shares have been subject to a product approval process, which has
determined that the Placing Shares are: (i) compatible with an end
target market of retail investors and investors who meet the
criteria of professional clients and eligible counterparties, each
as defined in MiFID II; and (ii) eligible for distribution through
all distribution channels as are permitted by MiFID II (the "Target
Market Assessment"). Notwithstanding the Target Market Assessment,
investors should note that: the price of the Placing Shares may
decline and investors could lose all or part of their investment;
Placing Shares offer no guaranteed income and no capital
protection; and an investment in the Placing Shares is compatible
only with investors who do not need a guaranteed income or capital
protection, who (either alone or in conjunction with an appropriate
financial or other adviser) are capable of evaluating the merits
and risks of such an investment and who have sufficient resources
to be able to bear any losses that may result therefrom. The Target
Market Assessment is without prejudice to the requirements of any
contractual, legal or regulatory selling restrictions in relation
to the Placing and Subscription. Furthermore, it is noted that,
notwithstanding the Target Market Assessment, only investors who
have met the criteria of professional clients and eligible
counterparties have been procured. For the avoidance of doubt, the
Target Market Assessment does not constitute: (a) an assessment of
suitability or appropriateness for the purposes of MiFID II; or (b)
a recommendation to any investor or group of investors to invest
in, or purchase, or take any other action whatsoever with respect
to the Placing Shares.
Definitions
The following definitions apply throughout this announcement,
unless the context requires otherwise:
"Adjusted EBITDA" earnings before interest, tax and
depreciation, excluding share based payments;
"Admission" the admission of the Placing Shares to trading on
AIM becoming effective in accordance with the AIM Rules;
"AIM Rules" the AIM Rules for Companies, as published and
amended from
time to time by the London Stock Exchange;
"Allenby Capital" Allenby Capital Limited, the Company's
nominated adviser and
joint broker pursuant to the AIM Rules;
"Company" or "Gfinity" Gfinity plc;
"Directors" or "Board" the directors of the Company;
"Enlarged Share Capital" the issued ordinary share capital of
the Company immediately following Admission;
"Existing Ordinary Shares" the existing Ordinary Shares as at
the date of this announcement;
"General Meeting" or "GM" the general meeting of Shareholders to
be held at Gfinity Arena at Vue Cinema, Fulham Broadway Retail
Centre, Fulham Road, London SW6 1BW at 10.00 a.m. on 31 July
2019;
"Independent Directors" for the purposes of the Placing only,
Neville Upton and Andy MacLeod;
"Issue Price" 4.5 pence per Placing Share;
"London Stock Exchange" London Stock Exchange plc;
"Notice of General Meeting" the notice of General Meeting set
out at the end of the circular to Shareholders dated 15 July
2019;
"Ordinary Shares" the ordinary shares of 0.1p each in the
capital of the Company;
"Pareto" Pareto Securities Limited, the Company's joint broker
for the Placing;
"Placing" the subscription for and placing of the Placing Shares
at the Issue Price as described in this announcement;
"Placing Agreement" the conditional agreement dated 15 July 2019
between the Company (1) Allenby Capital (2) and Pareto (3) relating
to the Placing;
"Placing Shares" the 116,666,666 new Ordinary Shares which are
the subject of the Placing;
"Resolutions" the resolutions numbered 1 and 2 set out in the
Notice of General
Meeting to be proposed at the General Meeting;
"Shareholder(s)" holder(s) of Existing Ordinary Shares;
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contact rns@lseg.com or visit www.rns.com.
END
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