According to the U.S. Securities and Exchange Commission, NIP Group Inc. the holding company formed by the merger of NIP, Victory5 and eStar, is in the process of being listed on the Nasdaq Stock Market under the name "NIPG". The company currently has two principal subsidiaries:
- Ninjas in Pyjamas Gaming, based in Sweden, a long-established Western company operating on PC and console platforms, through licenses such as Counter Strike, Rainbow Six: Siege and League of Legends (LPL via the Victory 5 rebranding).
- eStar Gaming in China, a major actor in esport on mobiles, including Honor of Kings and Call of Duty Mobile.
A truly multi-sector group currently employing 235 people (including 225 in China), NIP operates, alongside its esports activities, a talent management agency and an events production business. According to the IPO notice - the document presenting the company to potential investors - the objective of this IPO will be to raise a significant amount of funds, expected to reach 5 million dollars, in order to :
- Expand and enhance esports presence, improve talent management agency staffing capacity, and boost event production offer.
- Invest in marketing and acquisitive operations to improve fanbase and engagement.
- Fund the external expansion strategy.
- Replenish cash flow.
The group's 3-phase business diversification strategy
Consolidated financial analysis: data in millions of dollars
Income Statement:
NIP Group announces strong financial growth from 2022 to 2023 of 27.14%, as a result of their expansionary expansion model and of their mergers with various independently-owned organisations, according to the IPO notice. The group closes 2023 with annual sales of 83.66 million dollars. For purposes of comparison, FaZe Clan went public in 2021 with an annual turnover of $50 million and a total valuation of $725 million.
The improvement in gross margins from USD 3.7 million to USD 7.2 million (8.6% of sales) did not, however, allow the company to achieve a balance in its operating activities, where the deficit increased to USD 14.5 million, or 17.4% of sales. The distribution of income reveals a significant particularity: the part of income linked to the talent agency business is more than 66% of total sales, representing around $55 million. The business model, based on a significant diversification of non-esport activities, covers more than 78% of commercial activities.
Bilan:
As per the IPO notice, the company's liquidity ratio has fallen from 1.15 to 1.02, jeopardising the coverage of short-term commitments. Quite simply, the company's ability to cover operating expenses is declining. As a result of the various acquisitions and high growth, the ratio of immaterial assets now represents 45% of the total assets, a significant weight relative to the recommended averages (20%). More detailed figures are provided for the following items:
- The estimated value of the NIP brand is $24 million
- The value of the royalties for the different leagues is $45.9 million.
- Goodwill (non-financial value): 141.4 million dollars.
Robust growth, combined with operating costs that were difficult to control, brought the total accumulated deficit of the holding company to 74.8 million dollars, representing 23% of the equity level.
The club has commented on possible solvency problems, particularly regarding short- and long-term bank commitments: "These credit facilities and loan agreements will normally mature in one to three years, and we may not be able to renew the agreement on commercially reasonable terms, in some cases at all."
The risks inherent in merging businesses
The club warns its future investors of the various risks inherent in their activities: "We are subject to international laws and regulations, many of them still being drawn up, which could increase our costs or harm our business", according to the IPO notice. The main risks come from the international nature of the company's activities, particularly in relation to the Chinese operations that represent almost all of its sales. One of the examples given by the club is the changes in Chinese legislation, both esport-related or strictly financial.
The IPO of NIP Group Inc. marks an important milestone in the company's ambition to become the world's largest esports organization. Capital raising and intra-group loans play a crucial role in financing its operations and expansion initiatives. However, regulatory restrictions in China and the risks associated with currency conversion and the transfer of funds remain significant challenges. By building upon a strong brand, diversified revenue flows and strategic growth initiatives, the company aims to create transformative experiences for esports fans around the world.
