Opinion: Why Guild Esports’ IPO Plans Should Raise Red Flags
When I first checked my phone Tuesday morning, I saw a notification about Guild Esports planning an initial public offering (IPO). For a second or so, I did wonder if I was still asleep and having an odd dream because the idea of a basically empty esports shell with a fancy name attached to it is absurd to me.
Before I share my opinion on the esports organization’s latest plan, let’s quickly look at the facts. Guild Esports is a British esports organization that was founded in September 2019 under the name The Lords Esports. Later that year, the company raised a £150K GPB ($195K USD) investment in exchange for 11.7% of its shares from investment firm Blue Star Capital, which made five more investments of approximately £150K ($195K) each around that time, including investments in Singapore-based Dynasty Esports, Indian Googly Esports, and Canadian The Drops Esports.
In June 2020, the company first appeared on the radar of most people in esports and many outside the ecosystem. The company raised a second round of financing, securing a £5M ($6.5M) private funding round. The funding made headlines globally because former professional soccer player David Beckham acquired “a significant minority stake” in the company through his investment vehicle DB Ventures. Parallel to the investment, the organization rebranded to Guild Esports and staged its “global launch.”
Alongside the investment and brand launch, the organization announced that it is targeting a follow-up £25M (32.5M) financing round at a company valuation of £100M ($130M). Since Guild’s jump into the spotlight, the organization picked up a Rocket League squad and FIFA player Niklas “NRaseck” Raseck.
Now the company is back with big news. It’s planning to do an IPO on the London Stock Exchange and raise £20M ($26M) at a valuation of £50M ($65M) to finance its expansion plans, including recruiting up to 20 gaming professionals. According to a release by Guild, roughly 40% of the company’s shares will be available through the listing.
My first impression is that I’m looking at a company, which is about to do an IPO while it has next to no history in esports, a microscopic fanbase, likely almost zero revenue, no franchising slots in any relevant esports format, basically no assets, and so on. But a couple of names to put out there, first and foremost David Beckham.
Beckham is definitely a name that draws attention and helped Guild Esports’ position its news on planning to go public in newspapers globally. However, it has yet to be clarified what role he will actually play in the development of the esports organization. It has to be assumed that Beckham’s business efforts over the next few years will primarily be focused on his Major League Soccer (MLS) project, Inter Miami CF, an MLS expansion team that debuted this year.
Another name Guild Esports brought to the table is Carleton Curtis, who serves as the organization’s executive director. Curtis previously served as vice president programming at Activision Blizzard since 2017 and was responsible for the global strategy and vision of the Overwatch League, Call Of Duty League, and Major League Gaming. While Curtis unquestionably brings lots of experience in the esports ecosystem to the company, you could also argue that the track record of some of his projects shows a lack of understanding of how to build a sustainable business model. Especially the Overwatch League and Major League Gaming are two projects that, in my opinion, are economic failures in terms of their global strategy and vision.
Also questionable is the fact that the organization’s targeted valuation was cut in half from £100M ($130M), indicating an unrealistic approach to evaluating their project. For comparison, when Astralis Group, which owns one of the most successful Counter-Strike: Global Offensive teams of all time and a franchise in the League of Legends European Championship (LEC), went public on the Nasdaq OMX Nordic market, the company raised roughly $22M at a valuation of $75M.
My current conclusion on the issue is that Guild Esports is trying to skip several steps in building a solid esports business. The IPO does not look like an investment opportunity that belongs on the open market because it’s at this point no more than a simple bet on an empty esports shell becoming a one in a hundred organization that is able to find a sustainable business model based on the clout the names attached to the company carry. Of course, no details in the form of an IPO prospectus have been made available so far, which would allow for a more fact-based judgment of the IPO and Guild’s business model.
Source: Read Full Article