GameSquare secures $10 million convertible note deal

FRISCO, TX - GameSquare Holdings, Inc. (NASDAQ:GAME) has announced the establishment of a $10 million convertible note agreement with Gigamoon Media, LLC. The note, which is set to mature on December 31, 2025, provides Gigamoon Media with the option to convert the debt into GameSquare common stock at $2.50 per share or into 5.725 million shares of FaZe Media Series A-1 Preferred Stock, which is currently owned by GameSquare.

The proceeds from this transaction are earmarked for the repayment of GameSquare's existing equity line facility with Yorkville Advisors Global L.P. and for general corporate purposes. GameSquare's CEO, Justin Kenna, highlighted the transaction as a continuation of the company's strategy to secure non-dilutive capital, expressing confidence in the financial resources now available to support growth strategies and capitalize on market demands.

Matt Kalish of Gigamoon Media LLC expressed his continued support for GameSquare and the FaZe Clan brand, particularly noting the leadership of CEO FaZe and the potential for future growth. If Kalish chooses to convert the note into shares of FaZe Media, it would imply a valuation of approximately $44 million for the entity, which is notably higher than GameSquare's current market cap of around $32 million.

GameSquare, with a mission to connect brands and game publishers with younger audiences, boasts a network that ranks among North America's largest gaming media networks as per Comscore. The company's operations encompass marketing services, data analytics, and brand amplification through its association with FaZe Clan, a leading gaming organization.

This press release contains forward-looking statements regarding the use of proceeds, the future performance of GameSquare and FaZe Media, and the ability to execute business plans. These statements are based on current expectations and are subject to risks and uncertainties that could materially affect actual results.

Investors should note that this article is based on a press release statement and should consider the forward-looking nature of the statements within. GameSquare has not provided any new financial guidance or updates on operational performance beyond what is contained in the press release.

In other recent news, GameSquare Holdings reported substantial revenue growth for the third quarter of 2024, with preliminary figures reaching $26.5 million, and revised its 2024 annual proforma revenue guidance upward to a range of $105 million to $110 million. This news follows the company's report of a 24% rise in pro forma revenue for Q2 2024. In addition, GameSquare's subsidiary, Zoned, has partnered with esports platform Clout and extended its sponsorship agreement with Rollbit. Analysts from Northland, Maxim Group, and Roth/MKM have initiated or maintained Buy ratings for GameSquare. The company has also announced new brand partnerships worth $3 million with Topgolf, 5-hour ENERGY, and Dairy MAX. Despite these positive developments, it's important to note a decline in gross margin due to a less profitable mix of sales. These are the recent developments for GameSquare.

InvestingPro Insights

GameSquare Holdings' recent $10 million convertible note agreement with Gigamoon Media comes at a crucial time for the company, as reflected in the latest financial data from InvestingPro. The company's revenue growth has been impressive, with a 175.59% increase over the last twelve months as of Q2 2024, and a 151.6% quarterly growth in Q2 2024. This robust top-line expansion aligns with GameSquare's mission to connect brands with younger audiences through its extensive gaming media network.

However, the company faces financial challenges that the new funding may help address. An InvestingPro Tip indicates that GameSquare is "quickly burning through cash," which explains the need for this new capital injection. The company's operating income margin stands at -30.61%, suggesting significant operational costs that are outpacing revenue growth.

Another InvestingPro Tip reveals that GameSquare is "trading at a low revenue valuation multiple," which could be attractive for investors looking for potential growth opportunities in the gaming sector. This valuation, coupled with the company's strong revenue growth, may explain why Gigamoon Media is willing to enter into this convertible note agreement with a conversion price significantly above the current market price.

It's worth noting that GameSquare's stock has shown a significant return of 52.22% over the last month, indicating recent investor optimism. However, the company's financial health remains a concern, as it is not profitable over the last twelve months and analysts do not anticipate profitability this year, according to additional InvestingPro Tips.

For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for GameSquare, providing a deeper understanding of the company's financial position and market performance.

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