Allied Esports Entertainment, I (AESE) research, news, and more from GeoInvesting

Company description

Thu, 20 Jun 2019 13:21:24 GMT

Black Ridge Acquisition Corp. was incorporated in Delaware on May 9, 2017 as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”). The Company’s efforts to identify a prospective target business were originally focused on businesses in the energy or energy-related industries with an emphasis on opportunities in the upstream oil and gas industry in North America, but are not limited to a particular industry or geographic region.

Research

Wed, 20 Jan 2021 05:00:00 GMT

Allied Esports Entertainment (NASDAQ:AESE) ($1.85; $64.9M market cap), a global esports entertainment venture, announced the sale of its World Poker Tour segment.

“Under the terms of the agreement, Element will acquire World Poker Tour for a total of $78,250,000, consisting of a $68,250,000 upfront payment and a fully guaranteed revenue share of 5% of WPT-branded tournament entry fees on Element-owned or licensed gaming platforms, up to a maximum of $10 million, payable over three years after closing.”

Geoinvesting member, Brian McCann, chimed in on this transaction:

AESE went public through a SPAC reverse merger transaction in August 2019 and operates 2 business segments:

World Poker Tour
E-sports

At that time, we added the warrants to our selected disclosed long list at $0.40 as a very speculative play. However, since the reverse merger transaction, the company has been unable to execute its growth plan. Interestingly, the warrants, which expire in August 2024 with an exercise price of $11.50, still trade at $0.30, despite the stock collapsing from $10.00 to the mid $1 levels.

We plan to dig a little deeper into AESE with Brian to try and make sense out of what is going on.

Research

Wed, 18 Sep 2019 16:50:58 GMT

Allied Esports Entertainment (NASDAQ:AESE) & (OTC:AESEW) ($6.00; $138.5M market cap), a global esports entertainment venture, has seen its shares slowly trend back up after a sharp pullback from around $10.00 following up to and the consummation of its business combination with Blackridge Acquisition Corp on August 9, 2019.

We are keeping a close eye on any updates regarding the possible repricing of the warrants mentioned in the Company’s August 6, 2019 press release:

“Black Ridge also announced that it may explore effectuating amendments to its outstanding warrants following the closing of the business combination to make them more attractive to holders, including but not limited to seeking to lower the exercise price of such warrants. However, there can be no assurance that such amendments will be considered or, if considered, that they will be proposed or approved.”

Some of the concessions made in order to complete the merger were partly to blame for the stock falling. The current exercise price of the warrants is $11.50, which expire on August 2024. Management can force conversion if shares of the common stock reach $18.00.

Research

Mon, 02 Sep 2019 04:00:00 GMT

Allied Esports Entertainment (NASDAQ:AESE) ($3.44; $82.6M market cap), a global esports entertainment venture dedicated to providing transformative live experiences, multiplatform content and interactive services to audiences worldwide through its strategic fusion of two powerful entertainment brands: Allied Esports and the World Poker Tour (WPT), announced first half 2019 results:

Sales of $13.5 million vs $9.7 million in the prior year
Net loss of $6.6 million vs net loss of $14.8 million in the prior year

“In the second quarter and through the first half of 2019, we successfully executed on our business plan and are excited about how both Allied Esports and WPT are performing,” said Frank Ng, CEO of Allied Esports Entertainment. “We are confident in our long-term strategy and look forward to continuing to drive growth and maximize shareholder value.

Strategic Alliances: As previously announced, Simon, a global leader in the ownership of premier shopping, dining, entertainment and mixed-use destinations, and TV Azteca, a premier sports television network in Mexico, have made equity investments into Allied Esports Entertainment and are launching strategic alliances with the Company.

Simon and Allied Esports will collaborate to create a new product offering focused on delivering esports experiences through integrated gaming venues and production facilities in select Simon destinations around the U.S. The in-mall venues will be designed for tournament play and daily use with the capability to be expanded into common areas for larger esports activations and live events. The two companies plan to announce additional details for The Simon Cup, a co-branded esports competition and gaming tournament festival this fall combining online and in-person play at select mall locations in the New York and Los Angeles markets, with the winners of the regionals moving on to HyperX Esports Arena Las Vegas for the final.

TV Azteca and Allied Esports will continue to work together to expand the esports landscape in Mexico through a number of immediate initiatives, including creating a 24-hour digital esports channel dedicated to esports and video gaming for the Mexican market and developing a network of esports talent across Mexico and Latin America. Future considerations also include building a flagship esports venue and additional esports and content facilities in Mexico and developing a localized online esports tournament platform for the market.

On June 27, 2019, we disclosed a small speculative long position in BRACW (now AESEW) in anticipation of the consummation of a proposed merger with an E-Sports business.

The related 10Q has not been issued yet. A few things we want to dig into include:

The cash flow statement to calculate our own adjusted EBITDA and net income numbers
Need to raise capital assessment by the company
Gaining a clear understanding of $32 million “due to parent” current liability

Research

Fri, 19 Jul 2019 14:42:30 GMT

Black Ridge Acquisition Corp. (NASDAQ:BRAC) (NASDAQ:BRACW), a public acquisition vehicle that intends to enter a business combination with Allied Esports and the World Poker Tour, announced it has entered into an agreement with Lyle Berman, a director of BRAC (Black Ridge Acquisition Corp.) and BROG, (Black Ridge Oil & Gas, Inc., BRAC’s sponsor) and Morris Goldfarb, a stockholder of BROG.

“Pursuant to the Purchase Agreements, the Purchasers have agreed to purchase an aggregate of $5,000,000 of shares of BRAC common stock ($3,000,000 by Mr. Berman and $2,000,000 by Mr. Goldfarb) in open market or privately negotiated transactions commencing two days after the filing of this Current Report on Form 8-K and ending on the close of business on July 26, 2019 at a price not to exceed the per share amount held in BRAC’s trust account (which is approximately $10.30 per share) (the “Maximum Price”).”

This move is common in SPAC transactions for the acquisition corp to gain more control of shares heading into the merger vote.

Research

Thu, 18 Jul 2019 14:07:46 GMT

Black Ridge Acquisition Corp. (NASDAQ:BRAC) (NASDAQ:BRACW), a public acquisition vehicle that intends to enter a business combination with Allied Esports and the World Poker Tour, gave an update on the adjournment of its special meeting of stockholders for the proposed business combination vote.

“As previously announced, Black Ridge entered into an Agreement and Plan of Reorganization pursuant to which Black Ridge will acquire Allied Esports and the World Poker Tour. The parties expect the proposed transactions to be consummated shortly after the Special Meeting is held and completed. The new date for the Special Meeting will be announced at a later time.”

On June 27, 2019, we disclosed a small speculative long position in BRACW in anticipation of the consummation of a proposed merger with an E-Sports business.

Research

Wed, 10 Jul 2019 12:01:07 GMT

We have been looking into the BRAC SPAC and tried to figure out what derivatives offer the most compelling risk-reward profile. Remember that BRAC units consisted of 1 share, 1 warrant, and 1 right. So, which one is more attractive, the warrant or the right, and why?

First let’s get an overview of the important datapoints:

The warrant: Entitles you to buy one whole share of BRAC for $11.50. It is exercisable for 5 years but can only be exercised 30 days after the business combination. The warrant can also get called by the company if the stock trades over $18.00 for 20 consecutive days. This is not an obligation for the company, but limits the upside investors could get if the stock price was really to go through the roof. The callable aspect and other nuances make it hard to price warrants exactly.

The rights: The rights are very straight forward. Every right will be automatically exchanged for 1/10th of a common share of BRAC upon a business combination. Having a right is essentially like holding 1/10th of a common share, the only difference being that if no transaction is consummated rights holders don’t get anything.

We conducted a little sensitivity spreadsheet for our readers. To see the return potential for the warrants and rights from today’s price in case BRAC stock is indeed going to rise.

Let’s take $16.00 as our base line target. From today’s prices ($0.3787 for warrants, $0.34 for rights) this implies an upside of over 4x for the rights, but your investments in warrants would almost 12 fold!

What does the pricing on the rights and warrants imply?

The warrants being priced as low as they are and the rights being priced similarly at a stark discount implies a few things that we believe might be too negative. Remember that one right is exactly 1/10th of a share except that right holders lose if no transaction occurs while shareholders can redeem their shares. The fact that the rights are priced at an approximate discount of 70% to the current trading price of 1/10 of a share either makes you think a transaction is highly unlikely to happen or that the stock would drop dramatically after the business combination.

We will continue to dig into the situation but it seems to us that the first SPAC that involves an E-Gaming company can have potential for a run up. So which is ultimately more attractive, the right or the warrant? Our spreadsheet shows that if you believe a business combination will occur (if not rights and warrants were to be worthless) the warrants provide more upside potential if the stock was to rise. At the same time in our experience warrants in SPACs don’t get a lot of time value attached to them, so if the stock was to fall to levels below $10 you were probably to stay flat of lose money on the warrants. The rights on the other hand limit your upside potential relative to the warrants, but do even provide you with good returns in case the stock goes down. If the transaction consummates and the stocks immediately after the business combination was to fall by 40% to $6, you would still have an intrinsic value of $0.60 for your right, which is almost a double from here.

Note regarding the calculation: We did not apply any discounts to the rights but priced them at 1/10th of a share. We priced Warrants at intrinsic value, as they are trading with notoriously low implied time value.

Research

Thu, 27 Jun 2019 17:35:33 GMT

Established A Small Speculative Position In BRACW

Black Ridge Acquisition Corp. (NASDAQ:BRAC) (NASDAQ:BRACW) a public acquisition vehicle that it intends to enter a business combination with Allied Esports and the World Poker Tour will have its shareholder vote of approval on July 8, 2019.

Yesterday, late in the day we tweeted the following:

This marks the second potential strategic investment in the past week. On June 19, 2019, BRAC announced that TV Azteca will purchase $5 million of BRAC shares upon the business combination closing. The investment is to broaden the Allied Esports deployment into Latin America with the development of a dedicated digital Esports channel and flagship Esports venue.

As we stated in our June 20th note, we are intrigued because of the hot sector and the limited number of shares the company may have post merger, which will be around 14 million. We have established a small speculative position in the warrants. Please note this is an extremely risky position as the warrants can likely go to zero if the business combination does not close. Furthermore, we do not have a 100% clarity on what the post merger capital structure will look like post merger.

The safer play would be to buy the actual common stock, BRAC, because if the deal in fact does not close, this stock will have a liquidation value of around $10.00.