Allied Esports Entertainment Inc., an operator of venues and live events for video gaming enthusiasts, says it’s planning to get out of the esports business, including a sale of its best-known property, the HyperX arena in Las Vegas.
Easier said than done, it appears.
The company (Nasdaq: AESE) previously entered into a non-binding letter of intent with a third party to sell its esports business, company president Lyle Berman told analysts on a Nov. 22 earnings call.
Terms of the deal, and the name of the buyer, weren’t announced at the time.
However, the following day, that undisclosed potential buyer said “that it is discontinuing discussions towards the proposed sale of the company’s esports business at this time,” according to regulatory filings. A reason wasn’t given for the about-face.
Allied officials said on Nov. 23 that as a result of the change in plans, it was “resuming conversations with other interested parties.”
Stock Slide
“It wasn’t an easy decision for us. Although we have made great strides in the esports business, it is still definitely cash burning,” Berman said when asked what led to the decision to sell the esports business.
Allied’s market value is only about $72 million, despite selling off another business line, the World Poker Tour to Element Partners, earlier this year for $105 million. It had about $95 million of cash on hand at the end of September, with a minimal amount of debt.
Allied went public in a reverse merger in 2019. At the time, its stock was valued around $10. Following the pandemic and the WPT sale, and its shares are now trading under $2.
Next Steps
A spokesman said Allied Esports plans to sell the entire esports business, including the “HyperX Esports Arena Las Vegas, the Allied Esports Trucks, AE Studios, etc.”
“The intent is to sell the entire esports business and all of its assets together,” the spokesperson said.
Following the esports division sale, Allied expects to be on the hunt for acquisitions.
“We are looking at all industries, we’re looking at opportunities that can redeploy our cash that the new company has a number of attributes, most likely they need to have a high growth potential, they have a documented use of our cash,” Berman told analysts in the conference call on Nov. 22.
He added: “We’re not looking for a company that we would run and manage; we’re looking for one that comes with management.”
What kind of company that is remains to be seen.
Allied Esports said in August it would “explore opportunities to acquire or merge with a business including, but not limited to, a business in online entertainment, real money gaming and other gaming sectors.”
Exec Changes
The company last month appointed gaming industry veteran Berman as president, as part of a plan “to accelerate the company’s progress in identifying and consummating the acquisition of one or more companies and concluding a possible sale of the company’s esports business.”
Berman is also serving as co-chairman of the board.
He previously headed the special purpose acquisition company, or SPAC, that brought Allied Esports public via reverse merger two years ago.
There have been several management changes at the company in recent months.
Allied Esports in October announced the appointment of Roy Anderson as the company’s chief financial officer, effective immediately. Anderson succeeds Anthony Hung, who served as the company’s CFO from September 2019 until his resignation in September 2021.Â
