Scout Gaming, a B2B fantasy sports provider, announced that it has found out about $1.7 million of financial commitments dating to 2021. Subsequently, the company announced that it will be cutting its workforce in half and diluting its shares by 90%.
Scout Gaming Identified a $1.7M Black Hole
The findings were first mentioned in a company statement to Nasdaq Stockholm. The provider said that the aforementioned commitments are going to affect its business in the current quarter. Even worse, the negative impacts are expected to persist and impact the following quarter as well. Finance experts predict that Scout Gaming may lose as much as half a million dollars in the next quarter alone.
Three of Scout Gaming’s major shareholders and chairman Niklas Braathen will provide the company with guarantees to help it secure a working capital for the months to come. In addition, Scout will likely see a fully secured rights issue of almost $10 million this summer. The company will also have to introduce some significant changes to its team to get through the hard times.
CEO Niklas Jönsson commented that the newly-found black hole in the company’s accounting and internal control is both strenuous and unacceptable. The silver lining of the situation, according to him, is that his team has finally identified the deficiencies.
We have taken decisive actions during the last months to ensure the quality within the company’s administration. We feel confident that the identified deficiencies are the last in the internal due diligence process which have been conducted.
Niklas Jönsson, CEO, Scout Gaming
The Company Will Part Ways with Half of Its Workforce
Meanwhile, Scout Gaming will have to lay off more than half of its workers and restructure its team. The company currently employs some 131 people and plans to reduce that number to a measly 63. Employees will be dismissed from the company’s offices in Bergen and Lviv. The company will also part ways with some of its remote workers.
Through this changes, Scout Gaming hopes to streamline its business and prevent future financial hurdles. Chairman Niklas Braathen addressed the matter:
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.
Niklas Braathen, chair, Scout Gaming
To further deal with the financial trouble, Scout will issue 200,000,000 new shares and will dilute the value of current shares by 90%.
The unfortunate news for Scout News come in the wake of a suboptimal first quarter of the year. The company’s revenues declined by 10% for the period as it earned only about $1.2 million.