Is This $10M Decision A Reason To Worry About Allied Esports?

On November 21st, Allied Esports Entertainment Inc announced that its board of directors had authorized a stock repurchasing program of up to $10 million. According to a press release, the manner, timing, and amount of these purchases will be based on market conditions, stock prices, and a slew of other factors.

Repurchases done via this program will be made on the open market in compliance with the Securities and Exchange Commission as well as federal security laws. It is expected that the program will be completed over the next 24 months.

The stock repurchasing program will be funded by Allied Esports’ working capital. Anything purchased through this program will be given the status of authorized but unissued shares of common stock.

“Allied Esports Entertainment is committed to maximizing shareholder value, and we feel this stock repurchase authorization is a positive step towards this goal,” said CEO Yinghua Chen. “We believe the current share price does not reflect the Company’s intrinsic value and this action underscores the board’s confidence in the company. Given our strong balance sheet, we believe this share repurchase program is a timely and appropriate use of the company’s capital resources.”

Allied esports currently trades stock on the NASDAQ Capital Market under the ticker symbol “AESE”. As of 10:50 AM EST on November 29th, 2022, one share of stock in the company is worth about $1.38.

The Profit‘s Take:

Stock buybacks are usually done to raise a company’s stock price. This would be normal for a company like Boeing where your options for growth are limited. However, esports is a growth area. Allied Esports is a growth company. They said that they had plans to buy something. But, with this latest decision, I get the feeling that they couldn’t find something to buy. That feels like the worst news of all. Share buybacks should be a last resort. If your company is implementing a share buyback program, that tells me you’ve run out of good ideas. I don’t think the esports scene has reached that point yet. There are cheap assets out there that CAN be bought. This just feels lazy on Allied’s part. Now would be the time for Allied Esports to do something impactful. I’m surprised to see this. I was never that down on Allied Esports, but now I would definitely steer clear.

(All information was provided by Business Wire, Investopedia, and Yahoo! Finance)