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July 2019 was a huge month for money flowing into esports-related companies, led by Chinese livestreaming service DouYu’s U.S. IPO, alongside 100 Thieves’ Series B funding round, and Simon Property Group’s investment in Allied Esports. Other top stories include the acquisitions of SteelSeries and ORIGIN PC, along with the potential sale of Echo Fox’s League of Legends Championship Series (LCS) franchise slot.
All told, The Esports Observer tracked more than $556M USD in new disclosed investments during the month of July. Here’s a look at the month’s biggest investment and acquisition stories.
DouYu Raises $775M in U.S. IPO
Chinese livestreaming service DouYu raised $775M in its U.S. initial public offering in July, with shares beginning trading on July 17 via the New York Stock Exchange (Nasdaq).
DouYu sold 67.39M American depositary shares at $11.50 apiece, with the IPO valuing the company at about $4B. It was the largest U.S. IPO for a Chinese company this year, topping the $645M IPO of coffee chain Luckin Coffee Inc. About two-thirds of the DouYu total (nearly $517M) came from new shares sold, while the rest came from existing shareholders selling off holdings.
Chinese multinational investment holding conglomerate Tencent Holdings, which invested $632M in the company in March 2018, remains the single largest shareholder in DouYu with a 37.4% stake as of July 17. DouYu originally filed plans for the potential U.S. IPO in April, but delayed it due to trade tensions between the United States and China.
In a regulatory filing, DouYu stated that it plans to use 35% of its IPO funding to secure content (including esports content), and another 30% for research, development, and technology. Additionally, 15% is pegged for marketing, with the remaining 20% available for working capital along with potential investments and acquisitions.
Roundhill: DouYu’s share price has remained under pressure following its IPO, alongside its Tencent-backed sister, Huya. While it is way too early to call for a winner amongst the two Chinese streaming platforms, the growth in the Chinese streaming market is undeniable. Based on the DouYu F-1, Chinese videogame streaming MAUs are expected to reach 400M by 2023 (versus 255M in 2018).
100 Thieves Nets $35M Series B
Esports organization 100 Thieves keeps the investments coming, announcing a $35M Series B round in July led by Artist Capital Management. The firm’s chief investment officer Josh Dienstag will join the 100 Thieves board of directors alongside the investment.
100 Thieves will use the funding in part to fund construction of a Los Angeles-based headquarters and training facility, which will include streaming stations and content creation capabilities, along with an apparel workshop and retail storefront. The organization’s “apparel drops” have yielded significant income and buzz, with the latest one generating more than $500K in revenue in less than five minutes, according to the team.
In October, the team announced a $25M Series A round that included investment from rapper Aubrey “Drake” Graham and entrepreneur and music manager Scooter Braun. 100 Thieves is co-owned by founder and CEO Matthew “Nadeshot” Haag, alongside Graham, Braun, and Cleveland Cavaliers and Quicken Loans chairman Dan Gilbert.
Roundhill: 100 Thieves continues to implement a strategy that emphasizes its positioning as a gaming lifestyle brand. We believe that if esports teams plan to go public, it is critical that they diversify their asset base outside of high-level competitive events. See: Luminosity Gaming’s merger with Enthusiast Gaming.
Simon Property Group Invests in Allied Esports
Shortly after June’s announcement that TV Azteca planned to invest $5M into Black Ridge Acquisition Corporation to become a shareholder of Allied Esports, Simon Property Group announced similar plans in July with its own $5M investment in the company.
Allied Esports will work with the investor to establish dedicated esports venues and experiences at select Simon locations. Simon operates shopping malls and other retail establishments around the world. Additionally, the companies will collaborate on a Simon Cup competition tour that will be held via Allied Esports’ HyperX Esports Truck, with a grand final at the HyperX Esports Arena in Las Vegas.
Last December, Black Ridge entered a definitive agreement to acquire both Allied Esports and sister company WPT Enterprises (owner of the World Poker Tour) from Ourgame International. The deal is still going through the required approvals processes from investors, shareholders, and regulatory agencies. Once completed, the companies will be known collectively as Allied Esports Entertainment and trade on the Nasdaq.
Roundhill: Allied Esports gets another stamp of approval from a significant investor, this time in the form of a $50B public REIT, Simon Property. We continue to expect that Black Ridge will complete its transition and begin trading as Allied Esports in the future, although timing uncertainty remains.
CORSAIR Acquires ORIGIN PC
A pair of hardware brands became one in July, as CORSAIR acquired custom gaming PC maker ORIGIN PC. While ORIGIN PC will continue on as its own brand, the companies will collaborate with CORSAIR software and hardware components to be included in future ORIGIN builds. ORIGIN’s focus is on fully-built computers, while CORSAIR makes components and peripherals such as storage, headsets, mice, and RAM.
CORSAIR sponsors teams such as Team Envy, Invictus Gaming, Team Secret, and BIG, along with streamers such as Jaryd “summit1g” Lazar and “Anne Munition” and the CORSAIR DreamLeague Dota 2 tournament series.
Roundhill: CORSAIR’s acquisition of ORIGIN PC further solidifies the company’s position as a leader in high-end gaming hardware. Having reportedly hired bankers in February 2019 to pursue an IPO (estimated enterprise value of $1B), this deal could be a preemptive move to further diversify the company’s revenue streams, now spanning across peripherals, components, and gaming PCs.
Following an internal struggle over alleged racist comments from a shareholder—and Riot Games’ demand that the company remove said shareholder—Echo Fox has submitted a proposal to sell its League of Legends Championship Series (LCS) franchise slot. ESPN reports that the interested buyer is Kroenke Sports & Entertainment, owner of the Los Angeles Gladiators, and that the purchase price is $30.25M. If the LCS does not approve the proposal, then the league itself will take over the process of finding a new buyer for the slot.
Gaming peripheral maker SteelSeries was acquired by Nordic private equity firm Axcel in early July. Axcel acquired the majority stake from L Catterton, an American private equity firm, and terms were not disclosed. Axcel maintains a broad portfolio, with the same Axcel V fund used for SteelSeries also containing investments in medical diagnostics equipment maker Orion Diagnostica and the European Sperm Bank. SteelSeries currently sponsors FaZe Clan, North, the Cavs Legion GC, and veteran Quake player Sander “Vo0” Kaasjager.
Russian internet services company Mail.ru Group Limited will merge its ESforce esports company with Singaporean game publisher Modern Pick Entertainment. ESforce comprises team Virtus.pro, tournament brand Epicenter, production studio RuHub, Moscow venue Yota Arena, and editorial website Cybersport.ru.
Mail.ru will transfer 51% of its ESforce assets to Modern Pick at a total implied company valuation of $110M ($56M for the stake), and Mail.ru already holds a 3% stake in Modern Pick. The new combined company has an estimated value of $350M, according to Mail.ru Group. The deal has a third-year failsafe that will allow Mail.ru to exit the merger and reclaim its 51% share depending on financial performance.
In other investment and acquisition news this month, Australian organization ICON Esports acquired Chiefs Esports Club—the Oceanic region’s most successful organization to date—and will continue on under the Chiefs branding. Additionally, mobile esports app Strafe has closed a $3M seed round led by BITKRAFT Esports Ventures, while Team Liquid parent aXiomatic Gaming has invested in startup agency AoE Creative, which will work with companies in aXiomatic’s portfolio.
Simplicity Esports has announced a definitive agreement to acquire PLAYlive Nation and its 44 gaming centers in the United States. Simplicity Esports has one gaming center of its own with plans to build more, and also fields teams and players in games such as PLAYERUNKNOWN’S BATTLEGROUNDS and Madden NFL. Also, Harris Blitzer Sports & Entertainment Ventures—parent company of Dignitas—has led the seed round (amount undisclosed) for StreamMetrics, a company that measures audience metrics for livestreamed content.
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The Roundhill BITKRAFT Esports & Digital Entertainment ETF (“NERD ETF”) is designed to offer retail and institutional investors exposure to esports & digital entertainment by providing investment results that closely correspond, before fees and expenses, to the performance of the Roundhill BITKRAFT Esports Index (“NERD Index”).
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus. Read the prospectus carefully before investing.
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Investing involves risk, including possible loss of principal. Esports gaming companies face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources, or personnel, may have products that face rapid obsolescence, and are heavily dependent on the protection of patent and intellectual property rights. Such factors may adversely affect the profitability and value of video gaming companies. Investments made in small and mid-capitalization companies may be more volatile and less liquid due to limited resources or product lines and more sensitive to economic factors. Fund investments will be concentrated in an industry or group of industries, and the value of Fund shares may rise and fall more than more diversified funds. Foreign investing involves social and political instability, market illiquidity, exchange-rate fluctuation, high volatility and limited regulation risks. Emerging markets involve different and greater risks, as they are smaller, less liquid and more volatile than more developed countries. Depositary receipts involve risks similar to those associated with investments in foreign securities, but may not provide a return that corresponds precisely with that of the underlying shares. Please see the prospectus for details of these and other risks.
The Roundhill BITKRAFT Esports Index is the first rules-based index designed to track the performance of the growing market of electronic sports, or “esports”. The Index consists of a modified equal-weighted portfolio of globally-listed companies who are actively involved in the competitive video gaming industry. This classification includes, but is not limited to: video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware companies.
An index is unmanaged and is not available for direct investment.
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