Interview of Leigh Hughes (RGG Interim CEO)
InvestorSarfari Comments:
Leigh Hughes as interim CEO of React Gaming Group is interviewed about the company’s online gambling ecosystem. The 30-minute conversation revolved around the three main assets: Loot.bet, the Parabellum eSports team and Compete.gg.
The following are the relevant highlights.
Leigh has been an entrepreneur in the venture capital world for past 20 years. He’s currently immersing himself in eSports education and connecting with the leadership of the company’s subsidiaries.
As indicated in our eSports Trend Report (here), the global online gambling market could hit a trillion dollars by 2030. Even though the eSports industry is growing at double digits, eSports is still dramatically under-monetized relative to traditional sports.
Online gaming has struggled to maintain its valuation in North America partly because of high customer acquisition costs. DraftKings is a perfect example of this pitfall, where their stock went from $70 to $10 in short span due to overspending on attracting customers. React Gaming is better positioned, with a very competitive cost formula for customer acquisition that’s ideal for sensible, steady growth and a clear goal to increase the average revenue per user.
During the pandemic, eSports had challenges executing live tournaments that used to fill large stadiums. Yet, viewership still increased online. Although during this period the sector experienced low investor interest, React Gaming Group was able to restructure successfully and obtain an Isle of Man gaming license (the significance of that explained here).
This sought-after license was a huge win for the company. It’s expected that React’s betting platforms will be augmented under this favored authority moving forward. Currently the company is in discussion with several jurisdictions around the world, with an eye to expand into Europe and other parts of Asia Pacific similar to the accomplishment in the Philippines (summarized here).
A year ago, React was a company with great vision but without asset ownership. Now with assets in hand, the market needs to see these assets return value for the business. One of the key moves has been to form an ecosystem where one asset can expose itself to the other to form synergy.
Loot.bet, with 500,000 registered users, has brought in $4.7 million revenue and $115,000 thousand in profit - with a focus to expose the brand to the North American market where potential is huge.
Another important part of React’s ecosystem is Parabellum. They’re a professional ‘Rainbow Six’ eSports team with over 450,000 followers. The men’s team in Vegas and the women's team in Brazil generate revenue through sponsorship prize money, advertising and merchandising. The team has advanced up the ranks in international tournaments, potentially attracting more sponsorships and advertising dollars.
Compete.gg, with 10,000 registered users, is a tournament platform for peer-to-peer wagering. Multiple players can use the platform to play popular game titles. Each head-to-head game has an entry fee set by the players and the Compete platform gives gamers of any experience level, a secure and fair playing environment to win money.
Leigh stresses that the performance of these assets will be shared with the public over the next few months. It’s important to voice happenings ‘behind the scenes’ with these key assets, since investors have an inaccurate impression of them being stagnant.
Several tough months have pounded the general markets and eSports hasn’t escaped the volatility. Companies making money and holding favorable numbers will be the fastest to trend up once the storm passes.
Like all small caps, the need to increase the size of the shareholder base is a priority. Existing shareholders are reminded that React Gaming was a “vision” company a year ago. The focus at that time was to raise money to acquire strategic assets to increase the value of the company. Now it’s time to maximize the return on these assets and to present the company in best light to the right investor base.
Leigh’s extensive capital market experience will move React Gaming to its next phase of growth. The effort is not limited to raising capital, but in executing that capital - while avoiding emotionality to market movements.
Our initial comments on Leigh Hughes’ appointment as CEO can be found here.