? Initial Public Offering
-
PC&console-focused racing games developer Motorsport Games (NASDAQ: MSGM) has raised $69m of gross proceeds at $20 per share price through IPO on NASDAQ. The proceeds will be used for further expansion into the mobile space, development of racing MSG engine, repayment of $10.4m outstanding debt, as well as potential acquisitions
-
After IPO, Motorsport Games remains a ‘’controlled company‘’, being a wholly-owned subsidiary of Motorsport Network
During the first days of trading, share prices spiraled from $20 to $30 per share (+50%), which eventually led to the market cap of $510m. Trading multiples based on LTM ended Sep’2020 are ~28x EV/Revenue and ~273x EV/EBITDA, assuming a current EV of $517m. The multiplies seem to be unusually high, considering the relatively unstable and week financials
-
One of the major concerns about the company is its heavy reliance on a few racing franchises/licenses in a PC&console sector. The genre is characterized by fierce competition with a consolidated market, that has several major players, including:
-
Electronic Arts (NFS franchise) with a recently announced proposal to acquire Codemasters (DiRT, F1, Project Cars)
-
Gran Turismo (exclusive for PS published by Sony)
-
Forza series (exclusive for Xbox published by Microsoft)
-
The Crew (multiplatform published by Ubisoft)
-
WRC series (multiplatform published by NACON
-
? Financial Highlights
-
Since its inception, the company has demonstrated an unstable growth with plato revenue in 2019, and a recent jump of +55% over LTM ended Sep’2020
-
Adjusted EBITDA has shown a low-margin profile and unpredictable trend, with EBITDA margin fluctuating from negative to positive over the year. Despite EBITDA recovery in 2020, the numbers are still relatively low compared to other PC&console studios
? Product
-
Founded in 2018, Motorsport Games is a multi-platform racing game developer and publisher of racing games, well-known for the NASCAR series. The franchise was brought in-house via the acquisition of 704 Games, the original owner of an exclusive license to the NASCAR franchise. The last installment of the franchise, NASCAR Heat 5, was published in Jul’2020
-
Currently, the company is working on a next-gen NASCAR NXT console AAA racing simulator, which is expected to be released in mid-2021. The company also plans to launch a new, redesigned NASCAR Heat Mobile in 2021
-
Apart from PC&console games, the company has published one mobile title NASCAR Heat Mobile, which demonstrated limited performance with ~1.3m downloads and $1.2m in-app net revenue in 2020
-
Motorsport Games is also engaged in multiple Esports racing events and competitions (e.g. NASCAR Heat Pro League, Le Mans Esports Series, Official DiRT Rally). During the first nine months of 2020, the company organized 53 esports events. However, the esports revenue constitutes 2% of the total company’s bookings
SOURCES: SEC REPORT
