Globe & Mail 07:13 AM EDT, 05/25/2022 (MT Newswires) -- Enthusiast Gaming Holdings Inc.'s (EGLX.TO) largest shareholder, Greywood Investments, LLC, which, together with its associates and affiliates owns over 9.3% of the company's shares overnight Tuesday, has notified Enthusiast's Board of Directors that, ahead of the company's AGM on June 29, Greywood plans to nominate several individuals to enhance the Board of Directors.
A shareholder since 2018, Greywood says it has "repeatedly expressed" its concerns regarding the performance of Enthusiast's Board and CEO. "Despite the constructive nature of Greywood's analysis and proposed solutions, its efforts have been met with transparent delay tactics by what appears to have become an entrenched Board and CEO, who have been unwilling or unable to make the requisite changes," the firm said in a statement.
The company's share price has dropped sharply -- from US$8.64 on April 20, 2021, to US$2.10 as of the close of business on May 23, 2022, a 76% loss. This compares to a drop of 16% for the Nasdaq and 4% for the S&P 500 Index over the same period.
In response, Enthusiast said Greywood has kept details about itself under wraps and appears to have no plan for the company other than to take full control of the Board. "This is evidenced by Greywood's singular focus on Enthusiast Gaming's CEO and a list of grievances that have nothing to do with long-term shareholder value."
Enthusiast Gaming said the company is well positioned for continued growth, as evidenced by the early successes this year:
A very strong start to Q1 2022 with revenue of $47.2 million - an increase of 57% YoY, beating estimates - led by accelerated growth and substantial margin expansion. This was driven by a combination of strong web and video views, higher direct sales, subscription growth, and better-than-expected contributions from U.GG and Addicting Games.
A growing direct sales pipeline with $5.2 million of direct sales in Q1 2022, up 136% year-over-year, supported by renewals and expansions with existing customers.
A 127% increase in year-over-year gross profit in Q1 2022, with gross profit effectively equal to Q4 2021, despite a strong seasonal difference between the two periods.
An 83% increase in year-over-year recurring subscription revenue in Q1 2022, driven by a 70% increase in paid subscribers.
All seven equity analysts covering the Company have a "buy" or "outperform" rating on its shares.
"Enthusiast Gaming remains committed to its ambitious plan to accelerate growth and continue margin expansion. Our flywheel model, centered around communities, content, creators, and experiences, will continue to drive increasing value. Our team is well positioned to continue delivering rapid top line growth, while increasing gross profit at a significantly faster rate. With so much potential right in front of us, now is not the time to risk your investment to unproven activist nominees," said Adrian Montgomery, CEO of Enthusiast Gaming.