Just a few months after Guild Esports launched with soccer legend David Beckham as a co-owner, the company is going public and seeks to raise £20 million (about $26 million) in a London IPO. But star appeal, and the novelty of being the UK’s first esports listing, may not be enough to attract public investors to this fledgling sector.
The upcoming IPO will value UK-based Guild, which is backed by both Beckham and Blue Star Capital, at around £50 million. The Financial Times reported that Guild had tried to raise £25 million at a £100 million valuation in June, when it launched, but later settled for a £5 million investment before deciding to go public.
The IPO comes at a time when lockdown restrictions have spurred interest in esports as traditional live sports have seen matches delayed and tournaments interrupted. The sector is expected to generate $1.1 billion in revenue this year, up 15.7% year-over-year, according to a report by games market research firm Newzoo, with an audience expected to reach around 495 million. By 2023, it is expected to make $1.6 billion. But not everyone agrees that this growth will guarantee a successful market debut.
“I think it might be too early for esports teams to go public right now, particularly for teams that have no sort of track record or are just beginning to build up their brand and entering the market,” said Jens Hilgers, founding general partner of esports investor Bitkraft Ventures. “The public market should not be playing the role of seed investors in a new startup.”
According to Hilgers, IPOs for less-established esports teams are not necessarily a product of them wanting to go public, but of the current private market environment, which has proved more difficult for fundraising.
Guild is also wading out into relatively uncharted waters. It has been less than a year since Astralis Group became the first esports franchise ever to go public, when it raised 150 million Danish kroner (about $22.2 million at the time) and listed on Nasdaq First North Growth Market Denmark. The business priced its shares at 8.95 kroner each, but they were trading just below 5 kroner Wednesday.
Similar to Astralis, Guild wants to replicate traditional pro sports like soccer, football and basketball. It will build and train teams for specific tournaments, generating revenue from winnings, sponsorship, merchandise and promotional events. The IPO proceeds will be used to add 20 professional players by the end of 2021 to compete in tournaments for “Fortnite,” “Rocket League,” “CS:Go” and “FIFA.” Unlike Astralis, however, Guild hasn’t had three years to build a brand before going public.
Nevertheless, there is still investor interest in the wider sector, particularly from the private markets. So far, 2020 has been a standout year for VC investment in the space, with esports companies raising $2.4 billion as of late August, according to PitchBook data. Esports teams received a significant part of the capital, but Hilgers warned that the high valuations of established teams and the difficulty for newcomers to break into the ecosystem could mean that the upward trend might not last.
“New investors are in more of a wait-and-see period right now on esports teams,” added Hilgers. “Relative to the other opportunities [in esports], teams will probably receive a smaller share [of VC funding] in the next one or two years. Investors will continue to support the teams that have already raised significant amounts of capital with a strong investor base and are in a leading position.”
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