Esports Has New Publicly Traded Company Putting on a Poker Face

(Bloomberg) -- The rapidly expanding world of esports has a new publicly traded company, one that’s hoping to learn from the business model of another online gaming predecessor: poker.

Black Ridge Acquisition Corp. has agreed to purchase Allied Esports International Inc., an esports entertainment company, and WPT Enterprises, the creator of the World Poker Tour, from Ourgame International Holdings Ltd. for about $150 million. The new company, called Allied Esports Entertainment Inc., will have an initial enterprise value of about $214 million and trade on the Nasdaq under the symbol AESE.

The aim is to bring the World Poker Tour’s business model for live events and media distribution to the burgeoning world of competitive video gaming, which is projected to grow to a $1.7 billion industry by 2021. The new company plans to operate venues, sell the content generated by those events, and then move viewers onto a new online tournament platform to be launched in 2020.

“There’s a gap in monetization in esports right now,” Black Ridge Chairman Ken DeCubellis, who will be chief financial officer of the new company. “It’s a big buzzword, but the main way companies and investors are approaching esports is by investing in the game publishers or acquiring the teams that compete. We see an opportunity to monetize the viewership right now.”

There are 40 million people playing online poker globally, according to DeCubellis. By contrast, there are 2.2 billion video gamers, with 380 million viewers of global esports contests.

“Esports is such a bigger market,” DeCubellis said. “And the growth rates are so much higher.”

Black Ridge is a special purpose acquisition company, or SPAC, an entity with no assets that raises money to fund a future purchase. Sponsored by Black Ridge Oil & Gas Inc., it completed its initial public offering in October 2017, raising $138 million in cash proceeds.

Under the terms of the deal Black Ridge is issuing $118 million worth of shares to Ourgame, plus about $35 million.

The transaction is expected to close in the first few months of 2019. At that point Black Ridge will be renamed Allied Esports Entertainment and its ticker symbol will change.

The entire Black Ridge team will move to the new company. It’s a group with gaming experience, including Lyle Berman, who is a member of the Poker Hall of Fame, and a longtime poker executive. Frank Ng, chief executive officer of Ourgame, is also stepping down to take the same role in the new company.

“This will be a very powerful ecosystem,” Ng said.

The network of Allied Esports venues includes facilities in Las Vegas and Hamburg, as well as Beijing and Shenzen in China. The company operates a pair of traveling venues built on 18-wheeler trucks and has launched a program to help partner with groups looking to build their own stadiums around the world.

The World Poker Tour has used Allied’s Las Vegas venue in the past, and will continue to do so. The merger into an esports company won’t affect the brand’s poker operations, Ng said, but the group’s network will be used to help model the new tournament and streaming platform.

The new group plans to invest $100 million in the next three years to expand the venues, adding six more trucks and almost quadruple its number of affiliates to 26.

©2018 Bloomberg L.P.