Guild Esports PLC

Established in September 2019, Guild Esports PLC (LON: GILD) is a UK-based developer of esports teams, which has commenced trading on the London Stock Exchange from 2 October 2020, under the ticker symbol GILD. Esports are electronic sports, usually in the form of video games. Since 2019, the Company has been developing commercial relationships for its in-house marketing technology and overall brand. On 25 June 2020, it signed a leading FIFA esports player and reached an agreement with David Beckham to become a shareholder and the face of the Company’s brand. 

Investment Rationale – Avoid at GBX 7.66

• It is a lossmaking entity which is yet to prove its operational and financial viability.
• It might face intense competition from established market participants.
• The economic downturn and instability can adversely affect the business.

Risk Assessments

• The esports sector might not continue to grow at a current pace in future.
• The Company does not have a proven track record and it is competing against the established players in the market.
• The inability to attract sufficient sponsors can impact the growth trajectory.
• The heavy reliance over social media platforms, inability to recruit sufficient talent, and failure to gain significant market share can impose significant operational risk.

Recent News

2 October 2020: The Company placed a total of 250,000,000 ordinary shares at 8 pence each, at a market capitalisation of £41.2 million. On admission, it had 514,617,362 ordinary shares in issue. Mirabaud Securities and Zeus Capital acted as joint bookrunners for listing.

Key Financial Information – for the period ended 30 June 2020 (as on 2 October 2020)

(Source: Company Website)

• As of 30 June 2020, the Company has not generated any revenue, while the net loss stood at £1.17 million.
• The top three shareholders include – Toro Consulting Ltd (9.33% of share capital), David Beckham (4.78% of share capital), and Blue Star Capital Plc (5.95% of share capital).
• The Company does not intend to pay any dividends in the near future and will retain cash for business operations.
• The esports sector grew by 26.7% between 2018 and 2019.

Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Board of GILD believes that there is significant potential in the esports market, which is experiencing rapid growth and projects to grow from 443 million in 2019 to 646 million viewers by 2023. The Company plans to establish its own esports teams to compete, while David Beckham will leverage his global influence to support brand development.

However, the Company is yet to prove its operational and financial performance, and it is still not generating any revenue. We do not have substantial catalysts to support the growth, and hence, it appears to be a quite risky bet to invest in the stock. So far, the stock’s High and Lows were GBX 10.00 and GBX 7.20, respectively.

Based on the factors discussed above, we have given a “Avoid” recommendation on Guild Esports PLC at the current market price of GBX 7.66 (as on 9 October 2020, before the market close at 2.36 PM GMT+1), while we look forward to reviewing the upcoming catalysts and market dynamics.

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