Scout Gaming’s mass layoff to include Ukraine employees
Swedish B2B provider of fantasy sports and betting solutions, Scout Gaming, has announced that it will dilute its shares by 90% and lay off more than half its workforce after discovering a $1.65 million hole in its finances. The ‘previously unknown’ financial commitments, the company said, would affect its cash flows and profit-and-loss statements for the current quarter.
The layoffs are expected to achieve cost savings of SEK 32 million, approximately $3 million. ©Adolfo Felix/Unsplash
The headcount of the company currently sits at 131, and the mass lay-offs will take place across all departments and across their two offices – including the one in Lyiv, Ukraine. A chunk of their remote work staff will also be laid off, the company said in a statement on Thursday. In the statement, Niklas Braathen, chairman of the board for Scout Gaming, said the company had identified historical deficiencies and one of the conclusions was that the staff had been allowed to grow ‘seemingly uncontrollably’ over the years.
“To cut 68 positions, corresponding to about 50% of the all employees is a big decision. The reductions are made within all departments and in both operational offices located in Bergen and Lviv, as well as within the employees who are remote employees. It is a particularly difficult decision, especially with regard to our employees in Lviv related to the situation prevailing in Ukraine. It is with great sadness that this happens but is unfortunately necessary to ensure the company’s continued existence. The company’s staff group has been allowed to grow, seemingly uncontrollably, for several years. It is our opinion that the cuts that are now being implemented will significantly contribute to an improved customer offering and a much more agile organization that will be able to serve our customers and partners to a much greater extent.”– Niklas Braathen, Chairman, Scout Gaming, Press release
Scout Gaming said that a new management group will be formed that will contain management positions for Finance, Sales and Product, who will complement the CEO. The mass restructuring is expected to achieve cost savings of SEK 32 million for the company. These decisions come weeks after the stepping down of former chief executive and president Andreas Ternström following his public display of dissatisfaction at the company’s growth and expenses in Q4 2021.
Shareholders to provide more bridge financing
At the end of May, Scout Gaming announced that it would be securing bridge financing from its major shareholders to the tune of SEK 20 million (approx. $2 million) for liquidity during this quarter. In a statement issued on Thursday, the company said that it would be raising another such round of bridge financing for the same amount from the shareholders to secure working capital.
“[…] the company plans to carry out a fully secured rights issue of SEK 100 million during the summer. The upcoming financing of SEK 20 million, and the financing of the same amount, SEK 20 million, that the company received from the same three major shareholders at the end of May of the current year, i.e. a total of SEK 40 million – will be repaid in full from the upcoming issue proceeds.The guaranteed bridge financing means that the company has the cash to run the company at least until the rights issue has been completed.”
Rights issue of SEK 100 million
This statement was released in parallel with another one which stated that the company would attempt to carry out a guaranteed rights issue of SEK 100 million (approx. $10 million), from which it would pay back the shareholders.
“The funds from the share issue will in part be used to repay the bridge financing amounting to SEK 40 million which the company has press released today and on May 29th of this year and in part concerning other measures which the company in separate press releases has informed about today, to create prerequisites for the company’s operations in the future. The proposal of the share issue is that it will be performed at the level of 0.50 SEK per share and will entail about 200,000,000 new shares with a dilution of around 90%.”
Scout Gaming’s share value, at one point on Thursday morning, was down 40%. The restructuring process, including the stepping down of the former chief executive earlier this month, came after Scout Gaming had announced last month that their Q1 2022 revenue had seen a drop of 10.4% corresponding to the same quarter in 2021.
