EEG appoints new CEO ahead of high-stakes survival quarter
Malta-based Esports Entertainment Group, which is listed on NASDAQ, will be helmed by industry veteran Alex Igelman as the company’s new CEO as it continues its survival battle in the new year. The appointment comes after a challenging 2022 for the company, in which it had to sell various iGaming assets after teetering close to both dissolution as well as delisting.
EEG endured a rough 2022 and had to shut down or sell a number of key business operations. ?Jose Fontano/Unsplash
In December, co-founder and former CEO Grant Johnson had been asked to step down by the board as the esports and iGaming company considered exiting iGaming altogether with a large-scale sale of its assets in the sector. The need for this came about as part of a long-standing issue related to debts, wherein it was speculated in October 2022 that the company might have to pull down the shutters altogether as it was at the mercy of an anonymous creditor with just over $2.5 million left in its cash reserves.
This revelation came despite the company reporting a year-on-year increase in revenue of over 190% in the third quarter of FY21-22. In May 2022, the former CEO had announced that asset sales would begin right away because the company had defaulted on its debts. While that endeavor continues to be pursued, the company which has offices across the world – including in New Jersey and the UK – will head into the new year with new leadership in the form of Ingelman. In his first official communication as the CEO, Ingelman suggested that the company would look to build on its strengths on the esports side.
“I am thrilled for the opportunity to join EEG at this important time in its journey and to work alongside someone as experienced and respected as the new Chair, Jan Jones Blackhurst. The Company is making significant strides to refine its focus on creating a valuable esports brand and is initially looking inward at some of its key assets to kickstart this process. The company also owns certain valuable assets and relationships in the esports sector and there is a substantial growing addressable domestic esports betting market for the company to take a leadership position in. The company will continue to structure its operations and financial position to maximize value for shareholders. I look forward to bringing my experience into the leadership of the Company and to focus on the execution of these transformative initiatives.”
What went wrong?
In the financial year ended June 30 last year, the EEG’s filings showed that inflated operating costs, particularly from their new ventures and acquisitions in the iGaming sector, had left them carrying heavy debts and a loss that was more than 4x the loss from FY20-21. The annual report showed that the company had brought in $58.4m in revenue for that financial year, but had spent close to $150m in operating expenses. Combined with their debt, that had taken the loss comfortably beyond the $100m mark.
The release of that report was the genesis of this new phase that the company finds itself in, and the phase began with an immediate focus on offloading the iGaming assets in question. EEG sold its online casino assets in Spain to begin payments on the principal of its debts, as well as its Argyll iGaming operations in the UK as it was unable to generate profits. In this note, dated December 9, 2022, the company said that the, “Initiation of a process to evaluate the strategic options for the iGaming business, including exploring a sale of iGaming assets due to increasing regulatory burdens and competition. Our new CEO will be tasked with assessing the value of the iGaming assets and determining next steps”.
EEG on thin ice with NASDAQ
The company also said in December that it had reached an agreement with NASDAQ to continue its listing on the exchange, provided the company meets certain performance parameters that it referred to as ‘evidencing compliance with NASDAQ requirements’ by March 31, 2023. In essence, the agreement will give EEG a slightly longer rope over the next three months to demonstrate its ability to recover. According to that same release, one of these paths to recovery could be a potential merger with an unnamed company, even as the company continues to try and restructure its debts.
“The Company recently received a non-binding letter of intent from a third party that offered to merge its assets, including intellectual property, with that of the Company. The combined company would focus on growing esports revenues. The proposal is currently under consideration by the Company.”
