Blue Star Capital (BLU ) said its investee company Leaf Mobile Inc, has completed its acquisition of East Side Games for approximately C$159 million. 

East Side Games is a private British Columbia group based in Vancouver, British Columbia, which publishes and develops mobile games. It has created ‘chart topping hits’ for several top Hollywood brands as well as for the Canadian superstars, The Trailer Park Boys. 

In 2020, East Side Games was recognised with numerous awards such as one of the "Top 50 Mobile Game Makers 2020" by pocketgamer.biz, as one of Canada's top small and medium employers, as well as one of Canada's fastest growing companies.

The esports and technology company detailed that today’s consideration consists of $19 million in cash and 444,444,444 common shares in Leaf at a price of C$0.225 per share. The remainder of the consideration is contingent upon Leaf achieving certain milestones.

Leaf recently completed a public offering raising gross proceeds of $23m, following which it received approval to list its shares for trading on the Toronto Stock Exchange (TSX). 

As a result, Leaf Shares will be delisted from the TSX Venture Exchange (TSXV) and its shares will start trading under the symbol "LEAF" on the TSX at the open of markets today. 

Blue Star's investment in Leaf was made in April 2020 purchasing 625,000 at a price of C$0.16 per share. The share price for Leaf was currently trading at approximately C$0.225 per share, valuing Blue Star's 10% holding in Leaf at approximately C$140,625. 

Following Leaf's admission of shares to trading on the TSX, Blue Star's holding will represent approximately 0.08% of Leaf's issued share capital, this morning’s statement highlighted.

Derek Lew, CEO of Blue Star, stated, "We would like to congratulate Leaf on the completion of its acquisition of East Side Games Inc. and their subsequent approval to move to the TSX. 

Following the acquisition, Leaf will be one of the leading, publicly traded mobile game companies in Canada, its progress highlights Blue’s ability to identify promising investments with potential for growth. It is an exciting time for Leaf, and a significant step forward in its strategic development. We look forward to supporting them on their journey."

Blue Star disclosed last month that the value of its investment portfolio had grown by c.78% in its final results for the year ended 30 September 2020, moving the group into profitability. The esports market is experiencing significant growth. In 2020 the market was estimated at around 495m viewers and is projected to reach around 646m viewers by 2023. This is expected to result in revenues growing over the same period from $950m to $1.60bn. Shares in Blue Star Capital have increased by nearly 30% in value since the beginning of November 2020 to open 8.33% higher this morning at 0.195p following the announcement.

Reasons to Follow BLU

Blue Star is an investing company with a focus on new technologies. Its investments include a 27.7% holding in SatoshiPay, a payments business using blockchain technology; investments in 6 early stage esports companies with shareholdings ranging from 5.9% to 13.6% and a 0.9% investment in Sthaler, an identity and payments technology business which enables a consumer to identify themselves and pay using just their finger.

The company provided an update in respect of its esports portfolio back in December 2020 as well as its investee companies - The Drops Esports Inc and Diemens Esports PTY Ltd.

Since the group’s initial £0.9m investment in six esports opportunities in November 2019, Blue Star has invested around £1.68m across seven companies. It has since invested in Guild Esports PLC, Dynasty eSports Pte Ltd and, most recently, in FORMATION Esports SaaS.

Based on the current valuation of Guild which was admitted to the standard segment of the LSE’s main market on 2 October 2020, and the higher valuation achieved by Dynasty in its subsequent fund raises, Blue Star's esports portfolio is now valued at £3.71m showing an unrealised gain of £2,035,890 and an increase of approximately 120%.

In its FY20 final results for the year ended 30 September 2020, which moved the group into profitability, the group said it had made a profit for the period of £1.7m compared with a loss in the corresponding period of £0.68m. The group cited the major contributor factor as ‘the uplift in valuation’ achieved on its investments in Guild Esports and Dynasty Esports.

The group hailed “an excellent year with strong performance” from its esports portfolio as well as “encouraging progress” from its tech payment businesses. It said its portfolio was successfully diversified with the move into esports which is now seen as its major focus.

Given the market growth and potential commercial opportunities, the Board ‘firmly believes’ that esports will eventually take up a significant proportion of the global sports industry.

Specifically, over the last twelve months, Blue’s esports portfolio has enjoyed two major successes and at the year end the valuation of the esports portfolio stood at around £3.8 million compared with an accumulated investment to date of approximately £1.7 million.

The board remains ‘highly confident’ in the strong underlying trends in esports and believes there is significant upside to be achieved moving forward from the esports portfolio.

Cash as at 30 September 2020 was £0.132m compared to £0.12m in the corresponding period. Post the year end the Company raised £0.095m through the exercise of warrants.

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