Highlights:
- · Animoca Brands receives strategic investments totaling US$4.1 million from strategic investors including M7 Asia and Mind Fund
- · Capital raised will provide working capital and support a proposed initial public offering (“IPO”) the Company is seeking by spinning off the assets of Pixowl SA, TSB Gaming, nWay Inc., and Quidd Inc. on Euronext or other public exchange
What is a Spinoff?
spin-offWhen a company creates a new independent company by selling or distributing new shares of its existing business, this is called a spinoff. A spinoff is a type of divestiture. A company creates a spinoff expecting that it will be worth more as an independent entity. A spinoff is also known as a spin out or starburst.
A parent company will spin off part of its business if it expects that it will be lucrative to do so. The spin off will have a separate management structure and a new name, but it will retain the same assets, intellectual property, and human resources. The parent company will continue to provide financial and technological support in most cases.
A spinoff may occur for various reasons. A company may conduct a spinoff so it can focus its resources and better manage the division that has more long-term potential. Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs. For example, a company might spin off one of its mature business units that are experiencing little or no growth so it can focus on a product or service with higher growth prospects.
Alternatively, if a portion of the business is headed in a different direction and has different strategic priorities from the parent company, it may be spun off so it can unlock value as an independent operation.
A company may also separate a business unit into its own entity if it has been looking for a buyer to acquire it but failed to find one. For example, the offers to purchase the unit may be unattractive, and the parent company might realize that it can provide more value to its shareholders by spinning off that unit.
About Animoca Brands
Animoca BrandsAnimoca Brands is a leader in the field of digital entertainment, specializing in blockchain, gamification, and artificial intelligence technologies to develop and publish a broad portfolio of mobile products including games such as The Sandbox, Crazy Kings, and Crazy Defense Heroes as well as products utilizing popular intellectual properties such as Formula 1®, Marvel, Garfield, Snoopy, Thomas & Friends™, Power Rangers, MotoGP, and Doraemon. Animoca Brands’ portfolio of blockchain investments and partnerships includes Lucid Sight, Dapper Labs (creators of CryptoKitties), WAX, Harmony, and Decentraland. The Company is based in Hong Kong, United States, South Korea, Finland, and Argentina.
Animoca Brands Corporation Limited has entered into unsecured convertible promissory notes (“Convertible Notes”) with a number of investors including M7 Alternative Investment Strategies Asia Limited (“M7 Asia”), Mind Fund Group Limited (“Mind Fund”), and other investors (collectively, the “Investors”) for net proceeds of US$4.1 million (approximately A$6 million). The Convertible Notes have a coupon rate of 9%, and are repayable at maturity subject to a number of redemption and conversion rights.
Latest news from Animoca
Blockchain gaming powerhouse, Animoca Brands, believes that acquiring mainstream games with loyal players and exposing them to the benefits of blockchain and distributed ledger technology (DLT) is the best way to attract new audiences into crypto.
Yat Siu, the chief executive of Animoca Brands emphasized that Animoca’s seeks to acquire games that “already have a captive audience that is already generating revenue [and] already loving the product as it is.”
“By giving it the benefits of blockchain technology, those gamers will get an additional benefit that we think is very powerful,” he added.
Siu described blockchain as driving a disruption to the gaming industry akin to the emergence of online gaming, but with very different concepts around “ownership and value.”
M7 Asia
M7 Asia, which focuses on alternative investments in Asia, is a subsidiary of M7 Real Estate Ltd. (“M7”), one of the leading specialists in the pan-European, regional, multi-let real estate market. M7 is a property fund and asset management business owned by its senior managers, with approximately 220 employees in 13 countries across Europe. The team manages over 830 retail, office and industrial properties with a value of around €4.7 billion (approximately A$7.6 billion). M7 typically aggregates numerous individual assets to form large portfolios with income levels and yields well above the real estate market averages.
Mind Fund
Mind FundMind Fund is a global venture capital company that has invested in several companies in the United States and Asia. Most notably, Mind Fund is an investor in Bytedance, one of the most valuable startup companies in the world with a reported valuation of over US$100 billion (approximately A$145 billion) as of May 2020 and is an investor in Hedera Hashgraph. Mind Fund also has an institutional partnership with Tokyo and San Francisco-based Digital Garage to collaborate and co-invest in a Global Incubation Stream of world-class entrepreneurial companies. Mind Fund is an existing investor in Animoca Brands.
M7 Asia Convertible Note
Under the M7 Asia Convertible Note, Animoca Brands has raised the principal sum of US$2 million (approximately A$2.9 million) which carries an interest rate of 9% per annum, with the interest payable every 6 months.The principal and any unpaid interest on the Convertible Notes are due and payable on 24 months from the commencement date of 18 June 2020 (“M7 Maturity Date”), subject to a conversion event or redemption. The term of the Convertible Notes may be extended for an additional 6-month period at the written request of either the Company or M7.
The outstanding principal and accrued interest of the M7 Asia Convertible Notes will convert into equity (“M7 Conversion Amount”) upon such time that Animoca Brands, or an entity which holds a mix of assets that may include some combination of the Company’s studios Pixowl SA., TSB Gaming., nWay, Inc., and Quidd, Inc. “ListCo”, lists on the Euronext exchange (or another exchange that the Company deems appropriate) . Upon the Listing Event, M7 Asia will hold 50% of the M7 Conversion Amount in Animoca Brands shares and 50% of the M7 Conversion Amount in ListCo shares.
As outlined above, the Convertible Notes are issued as part of a series of notes to the Investors. If a Listing Event has not occurred by the M7 Maturity Date, the Convertible Notes may convert into equity in Animoca Brands at any time on or after the M7 Maturity Date, at the election of the holders of the Convertible Notes who hold at least 65% of the outstanding principal amount of the Convertible Notes on issue.
M7 Asia also has the right to redeem the Convertible Note prior to the M7 Maturity Date if Yat Siu ceases to be in a decision-making role at both the Company and ListCo, there is a material change in the nature of the Company’s business, or the Company divests over 25% of its assets to an unrelated third party (“Redemption”). If M7 Asia exercises its rights to Redemption, it will be repaid any unpaid interest and principal, with the timing for such repayment subject to further discussion between the Company and M7 Asia.
Mind Fund and other investors
Animoca Brands has also entered into convertible note agreements with Mind Fund and other investors for an additional US$2.1 million (approximately A$3 million) on substantially similar terms as those outlined above for M7 Asia, except without an obligation for payment of interest until the maturity dates of those notes (which would occur within Q2 2022).
Management commentary
Yat Siu, co-founder and chairman of Animoca Brands, said: “We are incredibly honored and pleased that our vision for the future of digital assets and blockchain gaming has earned the confidence of some of the world’s most successful tech investors M7 and Mind Fund.”
Adam Lindemann, partner at Mind Fund, said: “We at Mind Fund are excited to continue our partnership with Animoca Brands. We believe deeply in the company’s vision to use blockchain to build economies where true digital ownership in games and virtual worlds will become a reality for hundreds of millions of people.”
Most recently, Animoca Brands acquired social casual gaming platform GAMEE for €4M ($4.5M) in shares plus earn-out payments of upto €1M in cash or shares.
In December last year, the game developer entered into an agreement to acquire 100% of the issued capital in nWay Inc for $7.69M. nWay is a Francisco based developer and publisher of competitive multiplayer games across mobiles, consoles & PC.
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