Allied Gaming & Entertainment Provides Updates Ahead of 2nd Quarter 2024 Earnings Release

Rhea-AI Summary

Allied Gaming & Entertainment (NASDAQ: AGAE) has provided updates ahead of its Q2 2024 earnings release. The company is facing a takeover attempt by Knighted Pastures , led by Roy Choi, without a control premium offer. Knighted has nominated three individuals to AGAE's Board and is attempting to remove three additional directors. AGAE views these actions as detrimental to stockholders' interests. The company will record a one-time pre-tax expense of approximately $3 million in Q2 2024 due to litigation costs, negatively impacting net income and EPS. CEO Yinghua Chen emphasized the company's commitment to cautious and strategic deployment of its cash balance to improve financial performance and enhance shareholder value.

Positive

• Significant cash balance available for strategic deployment
• Management's commitment to grow the company and maximize shareholder value

Negative

• One-time pre-tax expense of $3 million in Q2 2024 due to litigation costs
• Negative impact on net income and EPS expected in Q2 2024
• Ongoing takeover attempt by Knighted Pastures
• Increased vulnerability to takeover due to large cash balance

Financial Analyst

The $3 million pre-tax expense for Q2 2024 due to litigation costs is a significant financial hit for AGAE. This unexpected expense will likely lead to a substantial decrease in net income and EPS for the quarter. The company's vulnerable position, with a significant cash balance, makes it an attractive target for takeover attempts. This situation could lead to increased volatility in the stock price.

Investors should be cautious about the ongoing dispute with Knighted Pastures , as it may lead to further expenses and potential changes in company leadership. The lack of constructive engagement between Knighted and AGAE's Board is concerning and could result in a prolonged, costly battle for control. This uncertainty may negatively impact investor sentiment and the company's ability to execute its strategic initiatives effectively.

Legal Expert

The attempted board takeover by Knighted Pastures without paying a control premium raises significant corporate governance concerns. Their strategy of nominating new directors and attempting to remove existing ones 'for cause' appears aggressive and potentially disruptive to AGAE's operations. The ongoing litigation further complicates the situation, creating additional legal risks and financial burdens for the company.

Shareholders should closely monitor the upcoming 2024 Annual Meeting, as its outcome could significantly impact AGAE's future direction. The legal battle may also lead to increased scrutiny from regulatory bodies, potentially affecting the company's compliance costs and reputation in the market. This situation underscores the importance of robust corporate governance structures in protecting shareholder interests during attempted takeovers.

Market Research Analyst

The ongoing dispute with Knighted Pastures could significantly impact AGAE's market position and investor perception. The company's substantial cash balance, while attractive for strategic growth, has made it vulnerable to takeover attempts. This situation may lead to increased market speculation and volatility in AGAE's stock price.

Investors should consider the potential outcomes of this power struggle, including possible changes in leadership and strategy. The $3 million expense, while one-time, represents a considerable portion of the company's resources that could have been used for growth initiatives. This event highlights the risks associated with cash-rich companies in the current market environment and may prompt investors to reassess their valuation models for similar entities in the gaming and entertainment sector.

NEW YORK--(BUSINESS WIRE)-- Allied Gaming & Entertainment, Inc. (NASDAQ: AGAE) (the “Company” or “AGAE”), a global experiential entertainment company, announced today the following updates:

• Knighted Pastures LLC (“Knighted”), led by Roy Choi, is attempting to acquire control of AGAE without paying a control premium or constructively engaging with AGAE’s Board of Directors. Specifically, Knighted has nominated three individuals to AGAE’s Board for election at the Company’s 2024 Annual Meeting of Stockholders and is also purporting to attempt to remove for cause an additional three directors at the annual meeting, which the Company views as entirely without merit and detrimental to the interest of our stockholders. To further undermine the Company, Knighted has also undertaken litigation that AGAE has been forced to respond to, thereby causing the Company to incur significant and unnecessary costs that negatively impacted the Company’s financial performance.
• As a result of Knighted’s harmful actions, AGAE will record a one-time pre-tax expense of approximately $3 million for the second quarter of 2024, which will have a negative impact on our net income and EPS.

“AGAE is in a unique position with a cash balance that should be deployed cautiously and strategically to improve financial performance and enhance shareholder value, but unfortunately it is also vulnerable to a takeover attempt given this cash balance. While facing an activist shareholder who has refused to engage with the Board and the Company has been disappointing, rest assured that our board and management team remain even more committed to grow the Company and maximize shareholder value and we have full confidence in our strategic initiatives moving forward,” said Yinghua Chen, Chief Executive Officer of AGAE.

Allied Gaming & Entertainment plans to report its second quarter 2024 results soon and will announce the date of the Company’s earnings conference call ahead of the event.

About Allied Gaming & Entertainment

Allied Gaming & Entertainment Inc. (Nasdaq: AGAE) is a global experiential entertainment company focused on providing a growing world of gamers and concertgoers with unique experiences through renowned assets, products and services. For more information, visit alliedgaming.gg.

Forward Looking Statements

This communication contains certain forward-looking statements under federal securities laws. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of such terms, or other comparable terminology. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our control, that could cause actual results or outcomes to differ materially from those discussed in these forward-looking statements. The inclusion of such information should not be regarded as a representation by the Company, or any person, that the objectives of the Company will be achieved. Important factors, among others, that may affect actual results or outcomes include: risks associated with the future direction or governance of the Company; our ability to execute on our strategic and business plans; the substantial uncertainties inherent in the acceptance of existing and future products and services; the ability to retain key personnel; potential litigation; general economic and market conditions impacting demand for our services; our inability to enter into one or more future acquisition or strategic transactions; and our ability, or a decision not to pursue strategic options for the esports business. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of AGAE are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this communication. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business and results is described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 28, 2024, as amended by the Form 10-K/A filed with the SEC on April 29, 2024, as well as subsequent reports we file with the SEC. Readers are also urged to carefully review and consider the various disclosures we made in such Annual Report on Form 10-K and in subsequent reports with the SEC.

Additional Information Regarding the 2024 Annual Meeting of Stockholders and Where to Find It

The Company intends to file a proxy statement and WHITE proxy card with the U.S. Securities and Exchange Commission (the “SEC”) in connection with its solicitation of proxies for its 2024 Annual Meeting of Stockholders. THE COMPANY’S STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY STATEMENT (AND ANY AMENDMENTS AND SUPPLEMENTS THERETO) AND ACCOMPANYING WHITE PROXY CARD WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders may obtain the proxy statement, any amendments or supplements to the proxy statement and other documents as and when filed by the Company with the SEC without charge from the SEC’s website at www.sec.gov.

Certain Information Regarding Participants

The Company, its directors and certain of its executive officers and employees may be deemed to be participants in connection with the solicitation of proxies from the Company’s stockholders in connection with the matters to be considered at the 2024 Annual Meeting of Stockholders. Information regarding the direct and indirect interests, by security holdings or otherwise, of the Company’s directors and executive officers in the Company is included in Amendment No. 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”, filed with the SEC on April 29, 2024, which can be found through the SEC’s website at https://www.sec.gov/Archives/edgar/data/1708341/000092963824001652/a10k.htm#a_004. To the extent that there are changes to the direct or indirect interests of the Company’s securities by directors and executive officers, they will be set forth in SEC filings on Statements of Beneficial Ownership on Forms 3, 4 and 5. More detailed and updated information regarding the identity of these potential participants, and their direct or indirect interests in the Company, by security holdings or otherwise, will be set forth in the proxy statement for the 2024 Annual Meeting of Stockholders and other materials to be filed with the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240809365957/en/

Investor Contact:

Tyler Drew

Addo Investor Relations

ir@alliedgaming.gg

Source: Allied Gaming & Entertainment, Inc.

FAQ

What is the one-time expense AGAE will record in Q2 2024?

AGAE will record a one-time pre-tax expense of approximately $3 million in the second quarter of 2024 due to litigation costs related to Knighted Pastures 's actions.

How will the $3 million expense affect AGAE's financial performance?

The $3 million expense will have a negative impact on AGAE's net income and earnings per share (EPS) for the second quarter of 2024.

Who is attempting to acquire control of Allied Gaming & Entertainment (AGAE)?

Knighted Pastures , led by Roy Choi, is attempting to acquire control of AGAE without paying a control premium or engaging constructively with AGAE's Board of Directors.

What actions has Knighted Pastures taken regarding AGAE's Board of Directors?

Knighted Pastures has nominated three individuals to AGAE's Board for election at the 2024 Annual Meeting of Stockholders and is attempting to remove three additional directors, which AGAE views as detrimental to stockholders' interests.