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Why Esports Entertainment Stock Just Crashed

By Rich Smith - Feb 12, 2021 at 1:08PM

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Four days before its next earning report is due, Esports has let Wall Street know that it's going to sell some more stock.

What happened

Shares of Esports Entertainment Group (GMBL -3.68%) were looking like a bad bet Friday, down 13.7% as of 2 p.m. EST after the Malta-based provider of esports and esports gambling services announced that it will sell 2 million shares of common stock at $15 per share in a direct, at-the-market offering.  

Probably not coincidentally, the stock was trading Friday afternoon only marginally higher than the price of that secondary stock sale.

Stock crash red

Image source: Getty Images.

So what

Esports did not say what it is raising the money for. It did say that it expects to close the stock offering on or around Tuesday.

Also happening that day -- an earnings report. On Wednesday, Esports announced that it will release results for its fiscal 2021 second quarter after the close of trading Tuesday. Presumably, that will also be after it closes its stock sale.  

Now what

Investors buying this stock between now and that quarterly report are taking something of a gamble themselves -- on whether the earnings news will be good or bad. For what it's worth, analysts who follow the company predict that Esports will report $2.4 million in revenue (up about 10% sequentially from Q1), but an $0.18 per share loss -- 20% worse than last quarter.

So, investor, do you feel lucky?

This article represents the opinion of the writer, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Esports Entertainment Group, Inc. Stock Quote
Esports Entertainment Group, Inc.
GMBL
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