Gfinity (AIM:GFIN/FRA:3GF) sits in a sector we have been fans of for some time now, but that said, the share price has been slipping in recent months. Investors seem well disposed, however, to the news that Gfinity is going to buy Megit, which in turn owns website Stock Informer.
Gfinity shares have had their ups and downs in the last 12 months, and are still well off their 52 week peak of 6.2p. Even with the boost from the Stock Informer news, they are still trading at around 4.35p.
Positioned in the fast growing esports market
But what’s not to like about Gfinity? The company trades in the hot esports market which many investors believe will have a rosy future. The pandemic and the lockdown are considered by analysts to have provided esports with a shot in the arm. Gfinity has a market cap of about £40m and booked revenue in December 2020 of £1.51m.Gfinity has some awesome partnerships for its esports business, and has worked with with likes of Formula One, the Premier League, Microsoft and Activision Blizzard. The company organises online and offline competitions for the large and growing global gaming community.
Gfinity Digital Media – aka GDM – is the company’s branded website and social media division. It also owns proprietary technology that helps to create what it calls “a level playing field” for participants in its competitions.
The Stock Informer deal
The acquisition of Stock Informer / Megit sees Gfinity paying half the consideration in cash and the rest in stock. The maximum payable over the earn out period is £1m. Gfinity raised £3.3m before expenses via a share issue. The company has announced a retail offer for shares through PrimaryBid, but Gfinity said the funds raised from retail investors would be used to investing in the business and drive further revenue growth.
A fundraise is being conducted by an accelerated book building process which will commence immediately. The issue price represents a discount of 1.2% to the closing share price of 4.05p per share on 20 August. The fundraise is being conducted by Canaccord Genuity.
“Gfinity’s strategic focus is based on strengthening and growing ‘what we own’, in particular the Gfinity Digital Media group,” explained John Clarke, CEO of Gfinity. “The proposed acquisition of Stock Informer delivers this. It is a highly profitable ecommerce referral site for gamers and their lifestyles. Stock Informer will be embedded into the GDM division once the transaction completes. It is a transformational acquisition for the company and highlights the ambition of the Directors to continue to drive profitable growth within the group”
Stock Informer looks like a very good fit for Gfinity and a missing piece of the puzzle in terms of its suite of offerings for gamers and for its corporate clients. Stock Informer has a presence in both the UK and US markets and has built a reputation as a go to site to buy hard to secure products. It has 1.9m visitors a month and 344,000 followers on its social media channels.
The Stock Informer business could do well for Gfinity as a global chip shortage and a shift to online shopping boost digital sales and the quest by gamers for critical hardware. It could also be a platform for the sale of next generation gaming consoles.
