Super League Gaming, the first esports company to trade on Wall Street, stumbled and saw its shares dive after a lackluster market debut that saw investors across the market give the gaming startup a chilly reception. Despite the steady growth of the esports industry, potential investors in Super League Gaming were turned off by the company’s recent losses. While shares originally leapt from their opening price of $11.00 to $11.55, the company’s stock quickly dropped by over 22 percent to finish the day at a brutal $8.50.
Here’s a deep dive into Super League Gaming’s recent market debut, and what investors need to know about the nascent esports industry that still shows immense promise.
It’s not over for Super League Gaming
Despite the fact that Super League Gaming (NASDAQ: SLGG) represents the burgeoning esports industry, investors were relatively unimpressed by the company that’s made a name for itself by hosting competitive tournaments and leagues for popular video games. At the end of Super League Gaming’s first day of trading, the company had seen its share prices dip by nearly 23 percent and had only raised about $25 million. The young company has been posting losses recently, which is likely why so many investors gave it the cold shoulder, but Super League Gaming’s chilly IPO doesn’t necessarily spell out the end for the company.
After all, the esports industry that Super League Gaming is hoping to pioneer is growing at a breakneck pace. The global industry brought in over $860 million in 2018, for instance, with analysts expecting esports to generate a mammoth $1 billion by the end of this year alone. With the rise of popular streaming services like Twitch forcing long-time entertainment giants like YouTube to adjust their business models to accommodate competitive gaming streams, it’s also clear that a new generation of consumers and services is budding as we speak.
Before Super League Gaming can hope to profit off the explosive growth in competitive esports, however, the company needs to amend its finances to convince investors that it has a viable long-term strategy. According to documents filed with the SEC ahead of its market debut, for instance, Super League Gaming reported $12.3 million in losses in 2017 that expanded to $14.9 million in losses in 2018. There are thus clear reasons to believe that the company is struggling to profit despite the obvious rising popularity and potential of its industry.
This IPO doesn’t spell out the end for Super League Gaming, but it should serve as a hint that the company needs to readjust its course to convince investors to stick around for the long-haul.
Brands are still interested in Super League Gaming
One of the methods that the company will rely upon to draw itself out of the red will doubtlessly be an increased reliance on brand sponsorships. The company’s senior executives have made it quite clear that many brands are still deeply interested in the immense advertising potential that esports tournaments and leagues offer. Chief Commercial Officer Matt Edelman recently noted in an interview that brand partnerships could be immensely valuable for the company in the near future, after all. Partners like Topgolf present a real opportunity for the company to extend the reach of the esports industry past young, tech-savvy consumers and into the homes of elderly customers who are in love with digital golf and other traditional sports that have been modified into video games.
Due to Super League Gaming’s immense popularity with younger games who are huge fans of Minecraft, League of Legends, and other games that stream well, the company has been labeled the Little League of the esports industry. For Super League Gaming to tap into the true potential of the esports market, however, it may need to expand its reach beyond young consumers and attract older customers with more spending power. There’s good news on that front, as competitive gaming remains very popular with today’s young adults and shows no signs of slowing down thanks to aging gamers.
The company’s IPO was a dismal affair, however, and Super League Gaming noted in its SEC filings that the company “cannot predict if we will hit profitability soon or at all.” Until Super League Gaming demonstrates to potential investors that it can drastically inflate its revenue stream, it may have a hard time garnering the amount of capital it needs to keep chugging along. With Goldman Sachs (NYSE:GS) have accurately described the esports industry as having migrated “from wild west to mainstream,” however, there are few reasons to doubt the profitability of the industry the company finds itself attempting to pioneer.
The immense potential of the esports industry is becoming clearer by the day, but companies like Super League Gaming will need to take their lackluster revenue streams more seriously if they want the help of investors along their journey to become the tech monopolies of tomorrow.