Following a delisting notice in November, the Nasdaq has accepted Motorsport Games’ plan for regaining compliance and enacted a deadline.
The beleaguered developer has been through the wringer of late, but as it gears up for the launch of Le Mans Ultimate in just 13 days, the Nasdaq has extended its stay on the stock market.
On 17th November 2023, Motorsport Games noted that it had received a deficiency letter from the New York-based exchange’s Listing Qualifications Department. Back then, the following items were flagged as potential issues:
- A stockholders’ equity of $498,897, below the minimum requirement.
- A market value of listed securities of at least $35 million or net income of $500,000 from continuing operations in the most recently completed fiscal year or in two of the three most recently completed fiscal years.
The owner of Studio 397, and therefore titles such as rFactor 2, was then afforded up to 45 days to submit a plan to regain compliance.
Evidently, that proposal was submitted and now the Nasdaq, according to a recent SEC filing, has given the Miami-headquartered developer until 15th May 2024 to regain compliance and specifically a minimum stockholders’ equity of $2,500,000.
No small task, when MSGM closed yesterday (6th January 2024) at a paltry $2.46, factoring in 2022’s 1-for-10 reverse stock split. Should a delisting be the determined outcome, Motorsport Games still has the option of appealing any decision.
Delisting itself could result in numerous scenarios (such as trading over the counter) and does not necessarily mean the automatic cessation of operations.
“The company plans to negotiate and implement equity financing transactions and negotiate reductions of its licensing liabilities,” reads the document signed by Motorsport Games’ CEO Stephen Hood.
What any potential ‘equity financing transaction’ entails rather obviously, is unclear. As for ‘licensing liabilities’, according to a separate SEC filing last year, it owed the BARC (TOCA – the BTCC promoter) ‘approximately’ $800,000 in licencing payments.
In November last year, IndyCar notified Motorsport Games of its intention to terminate the exclusive deals to create ‘video gaming products’ and ‘esports events’ (but, seemingly, leaving the door open for ‘simulation product’ rights). This followed the pausing of game development and redundancy of the Australian team creating it.
Yet, no further update has been provided since the initial “evaluating the validity of INDYCAR LLC’s notice of termination” notice. Therefore, there is a chance that this deal is still an asset that can be sold, much like the sales of NASCAR video game rights to iRacing in October 2023.
Clearer Skies For Le Mans Ultimate’s Launch
All this financial manoeuvring has hung over Motorsport Games like a dark cloud since the release of the ill-fated NASCAR 21: Ignition.
The news of a Nasdaq grace period is potentially good news for the team trying to get Le Mans Ultimate over the line for the 20th February.
With this now just days away, the focus must be on delivering the best simulation possible for the initial early access launch with this grace period providing a temporary reprieve.