On December 10, PlayUp shareholders will make a pivotal decision on the proposed A$18.6 million sale of the company’s Australian gaming asset to CrossBet. This move follows an asset sale agreement established on July 27, and a detailed sale document distributed to investors on November 10. Approval from shareholders is the final hurdle before the deal can proceed.
CrossBet, a mid-tier Australian sports betting operator, recently became part of the emerging brand NextBet, which adds an intriguing layer to the transaction. The sale arises amidst PlayUp’s efforts to stabilize its operations following a turbulent period marked by failed mergers and acquisitions, including a highly publicized $450 million deal in 2021 to sell US gaming assets to FTX. The fallout from that collapsed transaction is still being resolved in the legal arena.
PlayUp’s CEO, Daniel Simic, has faced scrutiny in the aftermath of the FTX deal’s failure, particularly in light of accusations involving the former US division chief, Laila Mintas. Earlier this year, a Nevada federal court dismissed all claims against Mintas while allowing her counterclaims to proceed, escalating the legal battles Simic and PlayUp must navigate. Adding to the challenges, the court ordered a forensic examination of Simic’s devices after finding breaches of court orders, further complicating the company’s situation.
The Australian asset sale is critical for PlayUp, especially since its US division has seen its value diminish drastically following the revocation of its gaming license in New Jersey and subsequent workforce reductions in mid-2023. Insiders suggest that these developments have made the US division nearly worthless.
Among those expected to support the Australian asset sale are shareholders Richard Sapford and Daniel Simic, who collectively own nearly half of PlayUp’s shares. This sale is strategically structured to minimize liabilities, transferring A$8 million in debts to CrossBet. These debts include trade creditor obligations, employee entitlements, and fees to government and sporting bodies, alongside other non-trade creditors.
Moreover, Bet Club, an investment fund associated with various entities and partially owned by Simic, holds A$3.2 million in debt, which will convert to equity if unresolved within the next month. PlayUp directors hold a minor stake in Bet Club, further complicating the financial landscape.
The deal stipulates that in addition to settling liabilities, PlayUp will receive A$7.5 million in payments over a 60-month period. However, these payments are contingent upon avoiding an insolvency event. Given that PlayUp is divesting its primary revenue-generating asset, this stipulation raises concerns about CrossBet’s capacity to fulfill the payment schedule.
Reflecting on the potential outcomes, some shareholders express dissatisfaction with the transaction, believing it delivers less value than the FTX deal might have yielded. Despite this, the agreement offers a chance to eliminate the A$30 million note owed to FTX. Still, the sentiment among investors is one of loss, particularly since PlayUp remains EBITDA profitable and anticipates generating nearly A$40 million in revenue for FY25.
While these financial projections are promising, the over-leveraged state of the company continues to worry some stakeholders. A shareholder remarked that although the transaction could reset PlayUp’s financial footing, the outcome feels disappointing given the company’s growth potential and prior market expectations.
In conclusion, while the proposed sale to CrossBet might offer a pathway out of complex financial entanglements, it also underscores the challenges PlayUp faces in restoring its stature and ensuring long-term viability in an increasingly competitive igaming market. The outcome of the shareholder vote will be a significant determinant of PlayUp’s future course, marking either a fresh start or further entrenchment in its current difficulties.
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