Last checked at 2 Apr 2020 07:00
The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
2 April 2020
Gfinity PLC
("Gfinity", the "Company" or the "Group")
Proposed placing to raise £2.25 million and notice of General Meeting
Gfinity plc (AIM: GFIN), a world leading esports solutions provider, announces a proposed placing and subscription of 225,000,000 new ordinary shares of 0.1p each in the Company ("Placing Shares") at a price of 1 penny per share ("Issue Price") to raise £2.25 million, before expenses (the "Placing"), to be undertaken in two tranches.
Highlights
Proposed placing oversubscribed following demand from both new and existing investorsPlacing follows strategic review of the business, focused on restructuring the Group, including a sharpened strategic focus, a significant cost reduction programme and the adoption of a flexible variable cost operating modelNet proceeds will provide capital to support further growth as the Company sharpens its strategic focus on three core areas of existing success and competitive strength: Motorsports, Own Community franchise and building community for othersThe Placing Shares will represent approximately 32 per cent of the issued share capital of the Company, as enlarged by the issue of the Placing SharesOf the funds raised, £1.68 million is conditional, inter alia, on the approval of shareholders at a general meeting of the Company to be held on 21 April 2020 (the "GM") of resolutions to, inter alia, provide authority to the Directors to issue and allot further new ordinary shares otherwise than on a pre-emptive basis, further details of which are set out belowWarrants over ordinary shares will be issued on the basis of one for every Placing Share, exercisable at the Issue Price for 18 months, conditional, inter alia, on the GM
John Clarke, Chief Executive Officer of Gfinity, said: "This fundraising marks the final step of our strategic review process. The funds raised further strengthen our financial position following on from the previously announced sharpened strategic focus for the business and the significant reduction of our cost base. We now have a solid cash position to ensure that Gfinity can continue to capitalise on the exciting market opportunities we see ahead. I'm pleased that in this extremely challenging time our existing investors, as well as new investors, have shown their support for this fundraise, our strategy and our future."
A circular, containing information in relation to the Placing and convening the GM (the "Circular") is expected to be sent to shareholders tomorrow and will be available on the Company's website tomorrow at www.gfinityplc.com.
Further details of the Placing are set out below.
Further details of the Placing
The Company has conditionally raised £2.25m (before expenses) by way of the Placing of 225,000,000 Placing Shares at 1 penny per share in two tranches as to 1) 56,839,167 Placing Shares (the "First Placing Shares"); and 2) 168,160,833 Placing Shares (the "Second Placing Shares").
The allotment of the Second Placing Shares is conditional, inter alia, upon the Company obtaining approval of shareholders of resolutions to be proposed at the GM, to provide sufficient authority to enable allotment of the Second Placing Shares and disapply statutory pre-emption rights which would otherwise apply to the allotment of the Second Placing Shares (the "Resolutions").
Business and strategy overview
Gfinity is a leading international esports solutions provider, with an expert understanding of the rapidly growing esports industry and community. Gfinity is well positioned in the centre of the gaming ecosystem and provides market leading esports solutions to game publishers, sports rights holders, commercial partners and media companies.
Esports and competitive gaming is an exciting and evolving growth industry. Globally 2.2 billion people enjoy playing video games. Close to 400 million are dedicated esports fans that follow professional esports teams, leagues and franchises, play regularly and watch live esports events. A further 500 million are social gamers, people who love to compete and play regularly with friends and who watch gaming related content across multiple social channels (source: Global Web Index). The esports market is continuing to grow rapidly and is forecast to reach $1.8 billion in revenues by 2022 (source: Newzoo: 2019 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 for game publishers, sports rights holders, brands and media companies.
The Company has undertaken a comprehensive strategic review of the business to ensure it remains well positioned for future growth. The review included sharpening the Company's focus on three core areas of existing success and competitive strength: Motorsports; expanding the Company's Own Community franchise; and building community for others, with a focus on virtual gaming and entertaining content. Over the next few years, the Company expects to be able to drive significant revenue growth across these three core areas, where the Group has already seen significant positive momentum. The emphasis is on virtual online, rather than physical events.
In addition, the Company implemented a significant cost reduction programme, including Board and executive leadership changes, and is adopting a flexible variable cost operating model.
Gfinity is an industry leader in digital Motorsports and continues to see positive momentum in this space. The Company has a strong commercial pipeline of opportunities to design, develop and deliver racing programmes for a number of motorsports rights holders. We continue to work closely with F1 on the development of the 2020 and 2021 Formula 1 Esports Series. Formula 1 has recently commissioned Gfinity to produce virtual Grand Prix shows until the end of May, to fill the programming gap caused by the cancellation of physical races due to COVID-19. These shows are broadcast live on linear TV and across multiple F1 digital and social channels. In addition, Gfinity has strong relationships with all leading motorsports games publishers including Turn10 and Codemasters. It has also developed a Company owned Virtual Motorsport global competition. Further opportunities come from the Company's 'Race Control' proprietary technology IP, which provides real-time, in-race adjudication and data collection to guarantee the integrity of the race and enhance the experience for users. As a result, the Company is currently speaking with multiple series and manufacturers in the motorsports sector about the potential to support esports activities.
Gfinity's Own Community franchise is growing rapidly with RealSport101.com and Gfinityesports.com reaching close to 20 million gamers in March 2020 and more than 50 million gamers when their respective social channels are added. The Company has recently launched a new website, StealthOptional.com, focused on gamer tech which is a major growth area due to the launch of new consoles and related peripherals at the end of the year. It will also launch a fourth website, GfinityPro.com, later this year. The Company launched a Spanish version of RealSport101.com in March and will launch additional languages before the end of the financial year. In March, Gfinity entered into a partnership with Bidstack and Venatus, two specialist gaming advertising sales companies. Under the agreement both companies' dedicated sales teams will utilise their relationships with games publishers, gaming brands and consumer brands to drive increased bespoke programmatic advertising, video and audio-based promotions and site takeovers. Revenues from the Own Community franchise are expected to reach £2m by the end of 2021.
In addition to Gfinity's Own Community, the Company is also focused on building community's for others, utilising its online virtual tournament platform, successfully used in the second season of the recent ePremier League competition, and its content creation capabilities. Conversations are ongoing with publishers, sports right holders and brands to create community portals where gamers register and spend time playing, sharing and being entertained. This helps them to expand their reach and connect with a new generation of fans. This product is also at the core of conversations that are currently taking place with a number of commercial organisations and government bodies in Saudi Arabia, India and China.
Current trading and prospects
Gfinity has recently announced interim financial results for the six-month period to 31 December 2019. These results showed a 45 per cent reduction in adjusted operating loss, driven through a reduction in year on year operating expenses and a 300 per cent improvement in gross profit, despite a small decrease in year on year revenue.
Following the strategic review exercise outlined above, the Company has now further sharpened its strategic focus on the key areas in which it is already demonstrating a competitive advantage. Through this sharpened focus and a move to a more variable cost model for programme delivery, the Company expects to be able to reduce its underlying operating cost base by 60 per cent, supporting its pathway to breakeven in the short term.
The Group believes the business can withstand the anticipated operational disruption caused by the COVID-19 virus. While physical events have been postponed at the Gfinity Arena, the Company has seen a significant increase in the number of sports rights holders and media companies in particular looking for virtual gaming solutions and content. The Gfinity Arena is still being used for limited broadcast events, in line with all Government social distancing guidelines. This is being monitored daily.
The Company is already seeing increased levels of engagement with its digital platforms due to the restrictions placed on the movement of people across the globe. They are looking for gaming related content and are turning to Gfinityesports and RealSport101. Gfinity is seeing increased demand for virtual gaming solutions that utilise Gfinity's production expertise, its ability to connect players in remote locations and its online tournament and content management platform.
Reasons for the Placing and use of proceeds
Pursuant to the Placing, the Company will receive net proceeds of approximately £2.1 million. The net proceeds from the Placing will be used to provide general working capital to support growth as the Company focuses on three core strategic areas, including Motorsports, Own Community and building community for others.
Details of the Placing, warrants and admission to AIM
The Placing will result in the issue of a total of 225,000,000 Placing Shares, representing, in aggregate, approximately 32% of the issued share capital of the Company as enlarged by the issue of the Placing Shares. In addition, for every Placing Share, subscribers in the Placing will be issued with one warrant to subscribe for one ordinary share of 0.1p each in the Company ("Ordinary Shares") at the Issue Price (the "Warrants").
The Warrants may be exercised for 18 months following the date of Second Admission (as defined below). The Warrants shall not be admitted to trading on AIM or any other stock market and are not transferable. The issuance of the Warrants will be subject to the passing of the Resolutions and Second Admission.
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 8 April 2020 in respect of the First Placing Shares ("First Admission") and, subject to approval of the Resolutions, on 23 April 2020 in respect of the Second Placing Shares ("Second Admission") and in any event no later than 8.00 a.m. on 7 May 2020 (together, "Admission").
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 (as defined below).
Allenby Capital has entered into a Placing Agreement (the "Placing Agreement") with the Company under which Allenby Capital has, on the terms and subject to the conditions set out therein (including Admission), undertaken to use its reasonable endeavours to procure subscribers for 91,389,167 Placing Shares at the Issue Price. A further 133,610,833 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. The Placing is not being underwritten by Allenby Capital or any other person.
The Placing is conditional, inter alia, upon First Admission in respect of the First Placing Shares and upon the passing of the Resolutions and Second Admission in respect of the Second Placing Shares and the Placing Agreement not being terminated prior to First Admission or Second Admission.
The First Placing is not conditional on the Second Placing. Therefore, should the Resolutions not be passed to enable the Second Placing to proceed, the Company will need to seek additional funding.
Director subscriptions and options
Certain directors of the Company are subscribing for Placing Shares in the Second Placing as set out below:
Name | Placing Shares being subscribed | Ordinary shares on Second Admission | Percentage held of enlarged share capital on Second Admission
| No. of Warrants held on Second Admission |
Jonathan Hall | 500,000 | 722,222 | 0.10% | 500,000 |
John Clarke | 500,000 | 722,222 | 0.10% | 500,000 |
The Board is mindful of the need to incentivise executive directors and employees and is currently reviewing its option scheme and the options currently in issue. The Board intends to amend existing grants and make new grants to employees and certain directors in the near future, and further details will be announced once these are finalised. The total options granted would not exceed 10 per cent. of the Company's issued share capital.
Significant shareholder and related party transaction
Charles Street International Holdings Limited ("Charles Street") is subscribing for 70,000,000 Placing Shares and as Charles Street currently holds more than 10 per cent. of the Company's 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, those directors of Gfinity not taking part in the Placing consider, having consulted with the Company's nominated adviser, Allenby Capital Limited, that the terms of subscription to the Placing Shares by Charles Street are fair and reasonable insofar as Shareholders are concerned.
Upon completion of the Placing, Charles Street will hold 177,644,444 ordinary shares in the Company, representing 25.21 per cent of the then issued share capital, as well as 70,000,000 Warrants.
Details of the GM and Board recommendation
The notice convening the GM to be held at 10:00am on 21 April 2020 will be posted to shareholders tomorrow as part of a circular to shareholders with details of the Placing. At the GM shareholders will be asked to consider resolutions which will be proposed to enable completion of the Placing in respect of the Second Placing which, if approved will provide further share allotment authority to the Directors and disapply statutory pre-emption rights in relation to the allotment of the Second Placing Shares and shares issued for any future exercises of Warrants.
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 to be proposed at the GM, as they intend to do in respect of their own shareholdings of, in aggregate, 15,511,505 Ordinary Shares, representing approximately 3.23 per cent. of the Company's existing share capital.
If the resolutions to be proposed at the GM are not approved by shareholders, the Second Placing Shares will not be able to be allotted and less funds will be raised from the Placing. Therefore, the Company will have little working capital for this year and will need to adapt its business plans, strategy and cost base accordingly, but it is likely that the Company's performance, financial position and prospects will be adversely affected.
Total Voting Rights
On First Admission, the Company will have 536,402,920 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 536,402,920 and this figure may be used by shareholders from First 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.
On Second Admission, the Company will have 704,563,753 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 704,563,753 and this figure may be used by shareholders from Second 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
John Clarke, Gfinity | john.clarke@gfinity.net |
Jeremy Porter, Allenby Capital (Broker and Nominated Adviser) | +44 (0)20 3328 5656 |
Camilla Cunningham, Teneo (media) | +44 (0)74 6498 2426 |
About Gfinity
Gfinity 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, Activision Blizzard, F1 Esports Series and the Forza Racing Championship.
Gfinity connects directly with competitive gaming consumers through its growing community of gamers and its owned competition platform, the "Gfinity Elite Series".
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.