In this segment, we discuss Allied Esports selling their most lucrative asset World Poker Tour.
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aul Dawalibi 1:11:32
Alright guys, let’s let’s move on. Let’s talk about let’s, let’s change gears here. Let’s talk about Allied Eports. Because since we’re on this sort of public topic
Jimmy Mondal 1:11:45
Jeff Cohen 1:11:46
pour one out for one out for those
Paul Dawalibi 1:11:48
for one out for Jeff’s trade on that light
Jeff Cohen 1:11:52
It was a good trade
William Collis 1:11:54
Jeff Cohen 1:11:57
They’re trading for less than the cash value. That I mean, this is a this is a
Paul Dawalibi 1:12:03
Jeff Cohen 1:12:06
I don’t necessarily want to introduce the story. But they’re currently this is this is a negative story for the esports space. If you think about it, they’re trading currently for less than the cash value on their balance sheet. Which means that the, the public market is currently valuing the esports assets of Allied Eports at negative $25 million.
Paul Dawalibi 1:12:27
So let’s just let’s give some background here. So Allied, had to Allied Eports public company had two major sort of assets. One was World Poker Tour. The other was their live eSports assets like the the big stadium they’ve got in Las Vegas. And they sold the World Poker Tour assets. That’s what this article is about. They completed the sale of the World Poker Tour asset to Element Partners, which is a private equity group, they sold it for 105 million, which means they received 105 million in cash. And today, what’s interesting is two things. One, the company is trading at, I believe, like an $85 million market cap. Jeff, correct me if it was at 81, by the end of the day, 81 million and the CEO resigned today. So Frank stepped down as CEO of Allied. Any thoughts here on Why? You know, there’s an obvious thought here, which is it’s just a timing issue, right, like the sale just closed. At some point, the stock goes up and recognizes that there’s 105 million of cash in this business, and therefore should trade at around 105 million market cap. Does anyone think this is just a timing issue? Or is the market really punishing the value of these eSports assets? Jeff,
William Collis 1:13:55
I want to drink
Jeff Cohen 1:13:56
this, I think the market is the market is punishing the value of Esports assets. And I think the market is to some extent getting getting it right. Because these eSports assets are burning a lot of cash. So that 105 million, you know, I imagine they’re burning, I don’t want to say a number, he’s I’ll be wrong, but you know, they’re burning a decent amount. So I want to say it’s upwards of 10 million a year. So if they can’t offload these assets, which I you know, I know, they are currently going through a process of trying to do that, that 100 and 5 million will will then you know, become 95 million or less. So the market is not necessarily wrong here. Now, I know that what Allied is trying to do is they’re trying to basically become like us back again. And their Chairman Lyle Berman, you know, is is a serial entrepreneur, you know, wealthy guy, and I think that’s his plan is to basically take that 100 and 5 million and deploy it elsewhere, not within eSports so the eSports assets are a little bit of like an orphaned child right now where there’s they’re not really part of the like, I wouldn’t be surprised if they changed their name from Allied Esports to something like something acquisition Corp in the next few weeks. I’m not even joking, I think that they actually will, because they I don’t think they have any intention of operating the esports business, you know, over the medium term. So we’ll see what they do with those assets. But I don’t think it’s part of their their go forward plan.
Paul Dawalibi 1:15:30
I mean, who’s the who’s the buyer here? For these assets? I mean, the the stadium’s named HyperX, right. HyperX is now owned by hp, with hp go pick up that stadium. And the and the esports assets. Given that, you know,
Jimmy Mondal 1:15:49
they have one already, right. I mean, they need another.
Paul Dawalibi 1:15:54
No, this is their This is their they’ve, they’re paying for the naming rights of the stadium.
Jimmy Mondal 1:15:58
The This is for the pyramid in Vegas, right?
Paul Dawalibi 1:16:00
Correct. Right. This is that that stadiums owned by Allied Eports, HyperX pays for the naming rights.
Jimmy Mondal 1:16:06
Oh, I see what you’re saying.
Paul Dawalibi 1:16:08
Right. Like, instead of paying for the name, right, why not just buy the asset? If there’s a fire sale opportunity here? Why not HyperX be, you know, way more vertically integrated than, than just an accessories maker? doesn’t make any sense? Like, I don’t know, who do these eSports assets go to Jeff?
Jeff Cohen 1:16:31
I don’t know. Yeah, it’s, it’s a tough one. Like, I don’t know exactly who the buyer is, they kind of, you know, they they put this high value production studio in in Las Vegas. And I think it’s become a little bit of a white elephant project where, you know, they spent 25 or $30 million, building it, and it just kind of can’t really support that. And they’re, I think there’s a decent rent on the on the property as well. So it’s not, you know, it’s not just the sunk cost, there isn’t an operating cost aspect of it, that I’m not sure you can really cover. You know, they do have some eSports trucks that are pretty cool. I don’t know if you guys have seen those, they like you can send them to different events. So I think there’s some some value there. But it’s not clear. You know, I don’t think they’ve really built much of a brand within the esports space that, that, you know, I think there’s a lot of people that are clamoring, you know, to go out and acquire them. You know, there’s a lot of, there’s some good people that work there. Like I know, John is their CEO, like, I think he’s pretty well respected in the space. But yeah, I just it’s not clear who the obvious buyer is.
Paul Dawalibi 1:17:47
So we don’t think we ever see Allied Eports trading at its cash value.
Jeff Cohen 1:17:54
Once they get rid of the esports assets.
Paul Dawalibi 1:17:58
It’s a little weird to think about that.