Is Mobile Global Esports Inc. IPO a Good Buy?

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Contributor, Benzinga
July 20, 2022
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  • India-focused Mobile Global Esports Inc. will soon launch its initial public offering.
  • While the equities market has suffered through immense volatility, the esports industry continues to attract mainstream attention.
  • MGAM stock is wildly risky, so prospective IPO participants must engage carefully.

Once the near-exclusive domain of niche enthusiasts, in modern times, the video game industry has catapulted into the mainstream. A multibillion-dollar industry, the diverse gaming sector also sparked myriad iterations and subgenres, with mobile gaming representing a particularly hot segment. As a result, Mobile Global Esports Inc. seeks to corral this enthusiasm with a hopefully successful initial public offering (IPO).

Though any public market debut carries significant risks, Mobile Global Esports has one major tailwind organically driving interest: the booming namesake discipline. With Generation Z – the first digitally reared age cohort – rapidly coming of age, its influence on mainstream society is unmistakable.

For instance, the upcoming Asian Games 2022 (which has been postponed to 2023 because of COVID-19 outbreaks) will feature the debut of esports. Four years ago, esports was a demonstration event in the 2018 Asian Games held in Jakarta, Indonesia, signifying how quickly paradigms have shifted. Additionally, the incorporation of esports competitions in major regional tournaments has many speculating that at some point, the Olympics may consider adding esports to its repertoire.

Admittedly, many investors might view such a proposition as unrealistic, if not downright unfathomable. However, the incredible support – and the dollars that the segment brings in – that esports effortlessly engenders cannot be denied.

Nevertheless, investors must carefully weigh the pros and cons of Mobile Global Esports. Below are several factors to consider.

What Does Mobile Global Esports Do?

Based in San Clemente, California, Mobile Global Esports is an aspirational organization that aims to develop an esports platform for university competitions in India and South Asia. According to the company’s original Form S-1 filed with the U.S. Securities and Exchange Commission (SEC), “management has experience in the esports business and has contracted for consulting services with Sports Industry of India, Inc. (SII).”

Further, the disclosure document states that SII “has promoted, operated and commercialized a total of 27 esports tournaments in India since May 2021.” SII held these events for “virtual inter- and intra-university rivalry tournaments,” which is presently the main focus area for Mobile Global.

The company enjoys these advantages:

  • Growth potential: According to Mobile Global’s Form S-1, India’s university sports segment is generally underdeveloped. Further, it wasn’t commercialized until SII televised basketball championships and introduced (American) football to the market in 2014. However, with a university system commanding over 37 million students across 993 universities and nearly 40,000 colleges, Mobile Global enjoys a massive total addressable market (TAM).
  • Niche sector: Within the vast video gaming empire, several power players dominate key segments, such as console-based digital entertainment. However, true to its name, Mobile Global Esports focuses on portable devices. Since the underlying format lends itself to mass integration, interest in the niche sector may be higher than console or PC gaming, which feature a higher barrier to entry (because of cost structures).
  • Commercialization network: While the business may be aspirational, management is highly motivated to turn Mobile Global to a successful enterprise. Among its achievements is the securing – via a license-granting agreement from SII – of a 73-member university network. Through commercialization of events held at these universities, Mobile Global can possibly accrue a dominant position in a young, burgeoning industry.

Another factor to consider is the Indian economy. Following a sharp dip into negativity territory in 2020 stemming from the COVID-19 crisis, the World Bank reported that India’s GDP growth hit 8.9%. It remains one of the most promising of emerging markets, suggesting further organic tailwinds for Mobile Global Esports

When is the Mobile Global Esports IPO Date?

Investors interesting in participation in the upcoming IPO of Mobile Global Esports should start their assessment and due diligence shortly, with the company scheduled to hit the public arena on July 26. Shares will trade on the Nasdaq exchange under the ticker symbol MGAM.

Late last year, Mobile Global filed its original Form S-1 with the SEC. At the time, the company intended to list its shares under the ticker MOGL. However, the conspicuous volatility of the global equities sector – combined with Russia’s destabilizing invasion of Ukraine and its subsequent economic consequences – may have influenced certain changes.

Indeed, throughout much of the first half of 2022, private enterprises with public ambitions had little reason to wade into the IPO calendar. Any IPO – or the first time a company releases its equity shares to retail investors – represents a risky endeavor. Participating investors (even those that got in on the ground floor) have no idea how the free market will value the business in question.

Therefore, it helps newly listing companies to make their debut during a bullish cycle. While this dynamic alone doesn’t guarantee anything, investors are less likely to participate in highly risky opportunities if capital return potential appears limited or even worse, liable to going negative. However, in recent sessions, many private firms have braved the choppy waters, thus providing some sense of confidence for MGAM stock.

With its IPO, Mobile Global seeks to raise $16 million through the distribution of 2.5 million shares. The estimated price range is between $6 and $6.75. At the midpoint of this spectrum, the company will command a market capitalization of $114 million. WestPark Capital represents the sole bookrunner for the deal.

What Analysts Are Saying About Mobile Global Esports IPO

Given the small market cap of Mobile Global Esports, not many analysts have weighed in on MGAM stock. However, the company has a number of positive and negative factors impacting the underlying business that prospective market participants should consider.

On the optimistic front, the main catalyst for MGAM stock is the massive and constantly growing esports sector. According to Grand View Research, the global esports market reached a valuation of just over $2 billion in 2021. However, experts project that by 2030, esports will hit a revenue tally of $12.49 billion, representing a compound annual growth rate (CAGR) of 21.9% between 2022 to the forecasted period.

Further, mainstream acceptance of esports represents another robustly positive catalyst for MGAM stock. While it may be hard for some to believe, major academic institutions now offer scholarships for esport talent. For example, administrators at the University of California, Irvine are seeking high-performing gamers for League of Legends and Overwatch. Moreover, the prize money – $6,000 for varsity teams and $3,000 for junior varsity – is not insignificant.

Finally, Mobile Global’s substantial ties to India-based universities should help the firm carve out a meaningful presence in a rapidly expanding economy.

On the other side of the equation, investors must consider the significant risks working against MGAM stock. Primarily, as management admits in its S-1 disclosure, esports – particularly focusing on the mobile device format – is a relatively new industry. Therefore, it’s unpredictable how this IPO can pan out.

Second, Mobile Global’s licensing rights with 73 Indian universities may not pan out well if some of the members withdraw from competitions, thus imposing reputational harm. As well, the company is dependent on this network and its relationship with SII.

Finally, the big one: Mobile Global is still in the developmental stage of its business, meaning that investors are not really investing in MGAM stock so much as they are taking a leap of faith.

Mobile Global Esports Financial History

As with many speculative IPOs, Mobile Global Esports is a purely aspirational company at the moment. Per management’s risk disclosures, the company has a limited operating history. It’s still in the process of organizing its business and has yet to generate either significant revenues or operations.

In the most recent (unaudited) data for the quarter ending March 31, 2022, Mobile Global posted zero dollars in revenue. However, it incurred expenses in research and development along with general and administrative areas, with total operating expenses coming out to $91,482.

On a positive note, the company has no liabilities on its balance sheet. Therefore, its cash holdings of $113,886 and deferred offering costs of $110,498 totaling to $224,384 represents its entire stockholders’ equity.

Mobile Global Esports Potential

One of the most appealing catalysts for Mobile Global Esports’ upcoming IPO is the potential to generate significant profitability. With a small market cap and an exciting, relevant sector – one that’s also focused on a top emerging region – it’s difficult not to appreciate the speculative potential for MGAM stock.

However, investors must be extremely careful with these tempting propositions. While some small-cap names do fly higher, many more tend to fail for a variety of reasons, including the inability to secure much-needed funding. Therefore, MGAM is an opportunity that should only be engaged with money that can be lost without incurring financial harm.

Where to Buy Mobile Global Esports IPO Stock

If you want to participate in Mobile Global Esports’ IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of best brokers to consider.

MGAM Stock Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

MGAM Pre-IPO

Those interested in acquiring MGAM stock on a pre-IPO basis should open an account with ClickIPO, which provides this opportunity.

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