IndyCar: iRacing loses IndyCar license, Lawsuits threaten new game (6th Update)
It was just days ago that Motorsport Games (NASDAQ:MSGM) was running flat out on all cylinders after following the most basic rules of Nasdaq trading.
Now, that finely-tuned engine just threw a rod and plunged just over a third in Thursday afternoon trading. What hit Motorsport Games that hard? A new debt arrangement with its majority stockholder.
The company is screwing its current shareholders by turning on the printing presses and issuing more shares of stock – diluting the share value of existing stock.
It’s analogous to what the USA government does every time they turn on the money printing press and flood the market with fresh dollars.
The new arrangement, a debt-for-equity deal, calls for Motorsport Games to pay the current outstanding debt with Motorsport Network, its primary shareholder. Motorsport Games currently owes roughly $2.949 million under the $12 million line of credit that Motorsport Network extended. The debt will be paid back with the release of new stock shares. Motorsport Games will file registration with the SEC and also will give Motorsport Network some new piggyback registration rights.
February 1, 2023
Shares of motorsports network company Motorsport Games Inc (MSGM) rocketed higher by more than 700% on Tuesday and were halted several times along the way.
On Monday, Motorsport Games entered into a debt-for-equity exchange agreement with majority stockholder Motorsport Network LLC to repay $1 million in debt under a $12 million line of credit.
“This debt exchange benefits our balance sheet, allows us to pay less interest expense and will help Motorsport Games to pursue product development and growth opportunities,” said Dmitry Kozko, executive chairman and CEO of Motorsport Games.
“This debt exchange also signals the ongoing confidence that our majority shareholder, Motorsport Network, has in Motorsport Games.”
Tuesday morning, Motorsport Games announced that it received notice from the Nasdaq that it regained full compliance with listing rules, fulfilling the compliance notice it received on Nov. 11.
January 17, 2023
It’s seemingly gone from bad to worse for Motorsport Games these past several months, with employees not being paid and threatening lawsuits, to its entire board of directors leaving the company over funding disputes.
In a new update from anonymous employees, Insider Gaming has learned that the company is now essentially being blackmailed to pay unpaid wages, or source code for four of its games will be released online.
Employee’s who spoke to Insider Gaming under the request of anonymity because they were not authorized to speak about company information has said that one employee has directly threatened Motorsport Games’ CEO, Dmitry Kozko, and the company’s new directors.
In the threat, it was said that the employee has source code for four of Motorsports’ games; NASCAR: Ignition 21, NASCAR: HEAT 5, IndyCar, and KartKraft. The employee has demanded that unpaid wages are paid to employees by January 25, or the source code for all four games will be released publically online.
Speaking with other employees not familiar with the situation, it was said that they were “not surprised” that such drastic action was being taken from someone who probably has “nothing to lose”.
The comments were made following Insider Gaming’s report last week that the entire Russian studio, consisting of 30 or so employees had not been paid since October. In addition, it was revealed that some employees were offered to relocate to Georgia (with no help from the company), in order to be paid their salaries.
Employee’s who spoke to Insider Gaming under the request of anonymity because they were not authorized to speak about company information has said that one employee has directly threatened Motorsport Games’ CEO, Dmitry Kozko, and the company’s new directors.
In the threat, it was said that the employee has source code for four of Motorsports’ games; NASCAR: Ignition 21, NASCAR: HEAT 5, IndyCar, and KartKraft. The employee has demanded that unpaid wages are paid to employees by January 25, or the source code for all four games will be released publically online.
Speaking with other employees not familiar with the situation, it was said that they were “not surprised” that such drastic action was being taken from someone who probably has “nothing to lose”.
The comments were made following Insider Gaming’s report last week that the entire Russian studio, consisting of 30 or so employees had not been paid since October. In addition, it was revealed that some employees were offered to relocate to Georgia (with no help from the company), in order to be paid their salaries. Insider-Gaming
December 26, 2022
Here is a related article about the bad experience NASCAR has had, and continues to have, with its racing game developed by the same gaming company – Motorsport Games – that IndyCar is using.
Motorsports publications Autosport.com and Motorsport.com are owned by the same company. It appears to be a rather incestuous relationship between the two motorsports bodies, the journalists who cover their sport and are fed inside information, and their gaming arm trying to muscle iRacing aside.
Meanwhile, F1’s owners must be smiling ear to ear.
December 22, 2022
IndyCar fans are furious about the loss of iRacing.
#IndyCar fans, we’re diehards. All that’s left. We keep this sport going.
Should we, though?
Is it time to #BoycottIndyCar and kill this farce once and for all?
This sport does nothing but hate it’s own fans. And I’ve had enough of it. Today was a breaking point.
— Nifty Fifty-Two (@nifty_fifty_two) December 21, 2022
In one fell swoop they alienated exising fans and prevented new ones from being exposed to the sport
— Adam Humphrey (@ahumphrey027) December 22, 2022
I don’t understand this decision by @IndyCar to not continue a decade long partnership with @iRacing. This is such a gut punch for that community. After all both brands accomplished together, including during the past few challenging years…🤷🏼♂️ https://t.co/fXl7D2K2gy
— Dale Earnhardt Jr. (@DaleJr) December 21, 2022
December 22, 2022
Another quarterly earnings call, another unsettling moment for Motorsport Games – the new IndyCar game developer. The Miami-headquartered racing game developer and publisher held its third quarter 2022 financial earnings call on 18th November 2022.
“Based on the cash and cash equivalents available as of October 31, 2022, and the Company’s [Motorsport Games] average cash burn, we do not believe we have sufficient cash on hand to fund our operations for the remainder of 2022 and that additional funding will be required in order to continue operations,” read the supplementary statement.
And this is who IndyCar is relying on to do their new gaming platform in place of iRacing?
Liberty Media can’t buy IndyCar soon enough!
| Motorsport Network owns Motorsport Games
Other Brands owned by Motorsport Network
|
CEO Dmitry Kozko explained that several funding options are being investigated.
“We continue to explore all options available,” said Kozko on the call.
“Those options still include different types of debt financing, there’s a couple of options in equity type of financing, there are options from the main shareholder with the existing credit line – however, of course, we’re not sure if there’s going to be the ability or not to fund, that is something that’s up to them.
“All those options are still on the table, they are being explored… We have to come up and announce something fairly quickly here to continue to support the growth of this business.”
In September, Motorsport Games received a $3 million cash advance from Motorsport Network – the parent company that owns seven million shares in the gaming offshoot.
This was from a “previously disclosed $12 million Line of Credit, the proceeds of which the Company [Motorsport Games] plans to use for general corporate purposes and working capital.”
In the three months, July to September 2022 (ending 30th September), the company’s net loss was $8.5 million and its adjusted Earnings before interest, taxes, depreciation, and amortization (EBITDA) loss was $6.5 million.
“The Company [Motorsport Games] has cash and cash equivalents available of approximately $1.8 million,” read the press release.
The multiple-real-world-license holding publisher has come under scrutiny of late following a Form 8-K filed with the States Securities and Exchange Commission.
It explains that Neil Anderson, Peter Moore and Francesco Piovanetti resigned from its board of directors, after being asked to do so by majority shareholder and parent company Motorsport Network. This followed an as-yet undisclosed disagreement pertaining to future investment proposals.
“The main shareholder pretty much asked the independent board members to resign, as a result of a disagreement,” said Kozko on the Q3 2022 earnings call.
December 21, 2022
The end of iRacing’s current licensing agreement with the NTT IndyCar Series, set to expire at the end of 2022, is set to bring dramatic changes to the open wheel racing landscape.
The two most impactful changes are the end of the official IndyCar-branded Series on iRacing and the end of the iRacing Indy 500. The iRacing Indy 500 was one of the largest events on the motorsports simulation platform.
| IndyCar just managed to piss off half their fan base in one fell swoop. |
The broadcast prohibition has left many iRacing leagues scrambling. Some, including WSRL, have outright cancelled their seasons. Meanwhile others, including Elite, are evaluating other options for cars that could be used in place of the IndyCar.
GAVINCAR, Sim Racers 4 Mental Health, and other groups are currently evaluating the possibility of an Indy 500 or a US 500 at the end of the year before the broadcast prohibition goes into effect.
Ultimately, all of these changes affect one of the biggest sim racing communities that has grown both nationally and internationally. Some members of the community became fans of IndyCar through iRacing. Others expanded their horizons, adding IndyCar, NASCAR, or other series to their repertoire of motorsports series they partake in.
