The Offer

Company Overview

Mobile Global Esports Inc. was initially incorporated in the State of Delaware under the name Elite Esports Inc. on March 11, 2021. On April 21, 2021, the company's name was changed to Mobile Global Esports Inc. It is the successor of an esports company founded by SII in India in 2016; together, the two businesses have been active in the esports market for seven years. The firm seeks to leverage the exclusive rights granted by SII to fund, control, and manage a national championship esports team for international competitions. The company primarily focuses on mobile esports with an initial concentration in India.

Key Highlights

Primary Offering: The company is issuing 1,500,000 shares at a price band of USD 4.00-USD 5.00. The corporate assessments for the net proceeds from this offering, assuming an initial public offering at USD 4.00 per share and assuming no over-allotment of shares is sold, will be around USD 4,980,000. Additionally, if the underwriter exercises its option in full, the net proceeds are expected to be approximately USD 5,790,000.

Use of proceeds:

Source: IPO Prospectus

Dividend policy: The business does not propose to pay any dividends soon and has not once announced or paid any dividends on its common stock. The corporation presently intends to keep any potential future earnings for use in the company. The decision to pay future dividends, if any, will be made by the board of directors of the business after considering several variables, such as the firm's financial situation, operating performance, present, and future cash requirements, and expansion plans.

Industry Analysis

• Esports are generally organized multiplayer video games that feature first-person shooters, multiplayer online battle arena games, real-time strategy, and competition, including virtual combat. Mobile esports are esports that are played by individuals or teams on mobile devices, often smartphones, and are streamed on an electronic esports platform.
• Esports Future: The global Esports industry is anticipated to generate USD 1.08 billion in sales in 2021 and USD 1.62 billion by 2024, according to Statista. India also has the fastest-growing mobile gaming sector globally. According to industry analysts, the esports market for mobile games is thought to have a 495 million-strong worldwide audience. According to SuperData, competitive games, social games, and brand crossovers like Fortnite X Marvel and Among Us helped Gaming Video Content (GVC) surpass 1.2 billion viewers in 2020. Games for virtual reality (VR) and extended reality (XR) increased by 25% because of improved headset technology and lower headset pricing.
• Indian Gaming Industry: The Indian esports market is diverse and still developing, but it is getting more and more cutthroat. In India, 32 esports businesses are active. Over 250 game production businesses have been drawn to it by its rapid expansion, which has led to the creation of rival platforms. In FY2019, Nazara Technologies, the industry leader, had a meager 13.9% of esports business revenues; however, by FY2021, revenues had soared by 84% to USD 61 million. The company's rivals in the online esports gaming market (apart from online gambling) are the esports league UCypher, Newgen Gaming/Penta Esports, Gaming Monk, WinZO, and Gamerji. During the Covid lockout, Gamerji held more than 6,000 esports events and added 150,000 new members per month, according to Inc42, an analytical company that tracks the Indian startup sector.

Financial Highlights (Expressed in USD):

• Pre-revenue company: As can be seen in the above table , the company has not generated any revenues from its operations as the company is still in the process of researching and acquiring technologies for the Indian market.
• Operating expenses: To expand its esports business, stage twenty-seven events, purchase technology for the Indian market, and pay for legal costs, accounting services, and bank fees, the firm incurred operational expenditures of USD 262,360.
• Net Loss and EPS (Loss): The firm concluded the period with a net loss of USD 262,360 due to zero sales and USD 262,360 in operating costs. Furthermore, the corporation had a Net Loss Per Share of USD 0.02 with 12,125,464 shares outstanding as of December 31, 2021.

Key Management Highlights

Risk Associated (High)

Investment in the IPO of “MGAM” is exposed to a variety of risks such as:

• Operational and profitability risk: Due to the company's short history of operations and no revenues, operational losses were reported from its inception (March 11, 2021) to December 31, 2021. Going forward, considerable losses are anticipated, especially in the shorter-term period. It's possible that MGAM won't make enough money, won't turn a profit, or won't be able to maintain its profitability.
• Volatility in the Broader market: The markets have been highly turbulent over the past six months because of several major events, including the Russia-Ukraine conflict, supply chain disruptions, multi-year high global inflation, and rising oil costs, the COVID-led lockdown in China, and others. The overall market attitude may continue to be affected by these macro developments.
• Overdependence on third-party information technology: MGAM depends on third-party systems and services, primarily those offered by Artemis Avenue, for its IT and other systems and services. Any errors, omissions, or disruptions in these systems and applications could damage the company's reputation, expose it to legal liability, disrupt its operations, and have a negative impact on its operating performance and potential growth. These systems and software may have bugs that haven't been found in the third-party platforms that are being made public.

Conclusion

In FY21, MGAM recorded a net loss due to expenditures made in the acquisition of technology to grow its company in India. Twenty-seven stage events had already been completed by the firm during its operations. A listing gain on a firm that is losing money might be difficult, given the various uncertainties that currently hovering around the global financial markets. The industry in which MGAM works, nevertheless, is still in its infancy and is estimated to expand rapidly in the years to come.

Hence, Mobile Esports Global Inc. (MGAM) IPO looks "Neutral” at the IPO offer price amid present market scenario, given the associated risks.