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While there are a few publicly traded esports organizations, the Danish Astralis Group recently became the first esports organization to make an initial public offering (IPO), as all others became publicly traded via acquisition or reverse takeover.
In this article, we’ll explore several insights the IPO and associated prospectus brought to light.
The Astralis Group is a Danish esports and media organization, which currently operates three team brands:
- Astralis, which has competed in Counter-Strike: Global Offensive since January 2016. The team obtained the rights to the Astralis name from the original founders of the Finnish Counter-Strike 1.6 team of the same name, which was disbanded in 2009. The new Astralis is one of the most successful teams in Counter-Strike: Global Offensive, counting a record four Major wins to its achievements.
- Future FC, which competes in FIFA tournaments, was founded earlier this year by the Astralis Group.
IPO Values Astralis Group at $75M
On Dec. 9, Astralis Group launched its IPO, which was oversubscribed by 77% (excluding pre-commitments), raising gross proceeds of ~$22M USD by selling 16,759,777 shares, the maximum amount offered. The offering was completed at a price of kr8.95 DKK ($1.33) per share, valuing the company at ~$75M.
The valuation at $75M put Astralis Group’s value at ~7.8x the midpoint of expected 2020 revenues. Since its IPO on Dec. 9, Astralis Group’s stock price has declined to kr7.40 ($1.10) at the market’s open on Dec. 20.
Majority of the $21M Raised Goes Towards League Buy-Ins
The estimated net proceeds of the IPO are kr139M ($20.69M). The majority of the proceeds raised in the IPO will go towards league buy-ins (50-60%). In total, the group has to pay LEC organizer Riot Games €10.5M EUR ($11.68M). Furthermore, plans are to use 15-20% for investment in international reach, 10-15% for product development, and 10-15% for brand development.
Estimated Break-Even in 2021
While the Astralis brand reached its break-even in August 2019, the whole group is expected to reach the threshold of positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2021.
The company estimates net revenues of $5.96M – $6.4M and an EBITDA of ($3.35M) – ($2.98M) in 2019. Estimates for 2020 are $8.93M – $10.4M in revenues and an EBITDA of ($744K) – ($521K). For 2021, the group estimates revenues of $12.7M – $14.9M and a positive EBITDA of $0 – $596K.
Currently (for the nine months ended Sept. 30), the group’s revenue streams consist of sponsorship revenues ($2.16M), prize money and other revenue from tournament participation ($1.7M), and merchandise and stickers sales ($491K).
Commercial partnerships are currently making up the largest revenue share for Astralis Group, having established partnerships with brands such as Audi, Jack & Jones, Turtle Beach, Omen by HP, Unibet, and others.
The company projects that in 2020, about 70% of total revenue (outside prize money) is generated through sponsorships. For 2020, around 50% of the projected revenue from sponsorships has already been secured through existing multi-year contracts. Astralis Group’s commercial partnership contracts are typically of two to three years in length.
In projections for 2020, about 20% of total revenues (outside prize money) are generated through league and tournament memberships. The company anticipates this percentage to grow significantly as esports leagues and tournaments start collecting ever-larger media rights for their live entertainment properties.
Astralis Group points out that prize money is potentially highly volatile as it depends on the performance of the individual team brand. Prize money won is generally offset 50-100% in costs as players have claims to prize money or performance bonuses. The company is projecting no growth in prize money revenue for the coming years.
Outstanding LEC Franchising Payments of $5.6M
Astralis Group acquired a franchise slot in the League of Legends European Championship for €10.5M ($11.68M) as Origen did not compete in the EU LCS when the application was made. The company still owes additional installments for Origen’s membership in the LEC. At the time of the publication of its IPO prospectus, Astralis Group has paid a one-time entry fee for participating in the league of €5.5M ($6.12M). A remaining amount of €5M ($5.56M) is outstanding to be paid in installments throughout 2021.
To comply with LEC participation rules, the shares of Origen Esports ApS were divided into two share classes: A-shares and OP-shares, on Nov. 8, 2019. Riot Games requires that specific individuals at all times shall exercise control of teams participating in the League of Legends European Championship.
Nikolaj Nyholm, Jakob Lund Kristensen, and founder of Origen, Enrique Martinez, are approved as such individuals with respect to Origen. In case OP-shares are being sold, Astralis Group Management is required to have potential buyers approved by Riot Games.
Astralis Anticipates up to $2.2M Participation Fees for a Franchised CS:GO League
In its prospectus, the company refers to an upcoming league structure for Counter-Strike: Global Offensive. The company anticipates participation fees of “up to $2.2M.”
Furthermore, Astralis has entered into an agreement with its former owner, BLAST ApS, to participate in the BLAST Pro Series on terms equal to those of other Counter-Strike teams. Blast has announced the intention to launch an updated format from the 2020 season.
Leadership with Esports and Sports Experience
The company will be led by CEOs Nikolaj Nyholm, a Danish tech entrepreneur and one of the founders of Astralis; and Anders Hørsholt, who formerly served as CEO for the Danish soccer club FC Copenhagen.
On a 2020 full year-basis, the company expects fixed staff costs for players and coaches to be $4.03M and the fixed cost to corporate employees is expected to amount to $2.08M. Total remuneration (basic salary and benefits, including pension) to the current executive management and senior management is expected to amount to $1.13M. The total estimated staff cost for next year is $6.65M.
More than 70% of Shares Remained with Existing Shareholders
Astralis Group issued of a total number of ~57M shares of which 29.53% were sold in the offering, while 70.47% of shares remained with existing shareholders of which founders Nikolaj Nyholm (via Beatnik ApS) owning 26.16% and Jakob Lund Kristensen (via JLK Holding ApS) at 14.09% are the largest shareholders.
Several existing shareholders, including the founders Nyholm and Kristensen, as well as Origen founder Martinez and Martin Lynge, have a lock-up expiration date of Dec. 9, 2021, preventing them from selling any of their shares before that date.
Split from RFRSH
On Aug. 14, Astralis Group ApS completed the acquisition of 100% of the shares in Astralis Group Management ApS (formerly Astralis Group ApS). The company first acquired 1.5% from former Astralis Management Group advisor Jason Yeh on Aug. 8, before securing the remaining 98.5% from BLAST ApS (formerly RFRSH ApS).
Astralis Group paid a purchase price of 2.35M EUR (less a discount for early payment, a specific indemnity, and less claims that were set-off according to an agreement with BLAST ApS) to BLAST ApS. In that transaction, Nikolaj Nyholm and Jakob Lund Kristensen sold their shares in BLAST ApS to BLAST ApS.
Following the acquisition of Astralis Group Management by Astralis Group, the company proposed to merge Astralis Group and Astralis Group Management in 2020 to simplify the corporate structure.
