Shareholders of Scout Gaming Group will vote on an issue next month that would dilution existing shares in the company by 90%.
Fantasy provider Scout announced that it would conduct a share issue in order to save the business in June, after it identified a SEK17m ($1.7m/PS1.4m/EUR1.6m) commitment in its finances which it said it was previously unaware of.
This commitment is expected to negatively impact the cash flow in the third quarter this year. The loss for that quarter will be around SEK 5.5m.
Due to the increased cost of doing business, Scout’s leadership has taken drastic measures in order to save their company. They have laid off 68 staff between offices in Bergen, Norway, and Lviv, Ukraine.
In addition to the layoffs and new stock, Scout announced that it would be issuing 202.7 million shares. This will dilute existing shares 90%.
Now, the board has revealed additional details about the issue of shares. The board has now revealed more details about the share issue.
Scout stated that this issue is fully guaranteed as the existing shareholders Topline Capital Partners LP, Scobie Ward, Novobis AB, Knutsson Holdings AB, and Erlinghundra AB pledged to purchase a total of SEK46m in shares. They also agreed to underwrite an additional SEK55m of shares if other shareholders did not wish to buy.
For nine months, the newly-issued shares can’t be sold without Scouts consent.
Topline Capital Partners has underwriting obligations that could result in a stake of more than 30% if not enough smaller investors purchase. This could trigger an offer for a majority share in the company. To avoid this situation, the company has agreed to sell enough shares to get it below the threshold, if necessary.
Due to the maximum number of shares in Scout’s Articles of Association, this issue requires shareholder approval. This approval vote will take place on the 1st of September.
