Today is a tough day for investors of Esports Entertainment (NASDAQ:GMBL). As it turns out, the company revealed yesterday that it’s planning a public offering of its common shares. On top of that, Esports Entertainment will issue warrants that allow the holders to purchase the company’s common stock. Today, GMBL stock traders are reacting to this news by dumping their shares.
In the 2020s, there has been a slew of publicly traded businesses focusing on e-sports and online gambling. Esports Entertainment is one of those companies. It has offices in New Jersey, the U.K. and Malta.
The company claims to be “well-poised to help fans and players to stay connected and involved with their favorite esports.” However, it takes money to make money in the esports market. To that end, Esports Entertainment intends to issue both common shares and warrants to the public.
This is a simple and direct way to raise capital, which can be used for a variety of purposes. However, sometimes investors don’t like it when companies enact share sales — and today, we’re witnessing an example of this.
What’s Happening with GMBL Stock?
Very soon after the financial markets opened in the U.S., GMBL stock skidded 12% and has since fallen as much as 20%. It was only a 9 cent move, but that’s big for a low-priced stock.
Shares of Esports Entertainment traded at $4 when 2022 started. More recently, the shares have fallen below 40 cents – a painful loss, no doubt, for Esports Entertainment’s loyal investors.
So, what’s bothering today’s GMBL stock traders? For one thing, the press release lacked some specific details that investors would surely like to know about:
“The offering is subject to market and other conditions, and there can be no assurance as to whether or when the offering may be completed, or the actual size or terms of the offering.”
Along with the uncertainty, Esports Entertainment’s investors are probably concerned about share dilution resulting from the issuance of common stock and warrants.
This, evidently, outweighs the benefits of potentially raising capital. So, today’s not a great day to hold GMBL stock. As they say in sports and in gambling, you win some and you lose some.
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On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
