Mighty Kingdom to raise funds ahead of bid to spill the board

The video game developer is raising money at a sharp discount ahead of a bid to spill the board next month.

Shane Yeend is trying to take control of the Mighty Kingdom board.

Mighty Kingdom is looking to raise up to half a million dollars at a steep discount as the embattled company faces a bid to spill its board next month.

The Adelaide company, chaired until recently by former ABC managing director Michelle Guthrie who was voted off the board last month, is raising $300,000 with a possible $200,000 oversubscription, at 1c per share.

This is well below the 1.7c per share the company last traded at, and well below a controversial $7m, 3.5c a share offer in August last year.

The new offer is secured against the company’s $726,000 Digital Gaming Tax Offset rebate receivable for last financial year, with each $1 note converting to 110 shares plus a one for two, 2.5c option

Shane Yeend, the chief executive of Gamestar – the largest shareholder in Mighty Kingdom which is leading the bid to spill the current board – wrote to Taylor Collison on December 26 threatening a legal bid to stop the proposed share issue should it interfere with an upcoming extraordinary general meeting, where Gamestar will attempt to spill the board and replace it with its own nominees, including Mr Yeend.

The offer document indicates that the note issue will need shareholder approval at a meeting to be held subsequent to the January EGM, however.

“The above offer is a absolute shock to myself as it was not offered to our group of companies, many other major shareholder or any shareholders for that matter,” Mr Yeend says in an email to Taylor Collison which The Australian was copied in to.

“In any event, I want to put you on notice that our group of companies will at a minimum demand to participate in this offer so as not to dilute our shareholding.

“If we are not permitted to do so, we will seek injunctive relief sought to do so, the same as the last dilutive round that massively diluted ALL shareholders.”

Mr Yeend also says his company will set up a secured loan on better terms to fund the company, conditional on the board resigning.

Mr Yeend has been locked in a battle with Mighty Kingdom in recent months, stemming from the $7m raise last year, which his company committed to putting $4m in to.

About half of this money was never paid, with Mr Yeend, who was also chief executive of the company for a period this calendar year, saying the conditions under the agreement were not met, and Mighty Kingdom disagreeing.

The Takeovers Panel in mid-December said it had accepted undertakings from Mr Yeend and related entities under which the shares would be bought back by Mighty Kingdom for no consideration and cancelled.

Mr Yeend is trying to unseat the board and replace it with his own nominees, and at the company’s annual meeting last month, was successful in leading a vote against the re-election of Ms Guthrie.

He has also called for an EGM, which will be held on January 19, where he will attempt to unseat the board and replace it with his own nominees which are Roseanne Healy, Keith Middleton, Boris Patkin and Mr Yeend.

If successful, Mr Yeend says he intends to install his own nominee as chief executive and also set up a 10 person advisory board including global experts in gaming.

Mighty Kingdom has told its shareholders to vote against Mr Yeend’s resolutions, saying the proposed new directors lack experience in the industry and Gamestar had failed “on numerous occasions to meet its previous obligations”.

“Mighty Kingdom emphasises Mr Yeend’s repeated false and negative public statements about the company, damaging Mighty Kingdom’s reputation and shareholder value”, the company said in the notice of meeting.

“Mr Yeend’s lack of articulated strategic direction for Mighty Kingdom raises concerns about his leadership capabilities.

“Mr Yeend has had the opportunity to take charge of Mighty Kingdom whilst he was CEO, however he chose to leave without notice.

“Mighty Kingdom believes the resolutions proposed by Gamestar threaten stability at a crucial juncture and would cause unnecessary disruption”.

Mighty Kingdom also has a strategic review under way, which was intended to be finalised by the end of December.

Mighty Kingdom has been a financial disaster for shareholders, with the stock listing at 30c in April 2021 after a $18m capital raise, and now changing hands for just 1.7c.

The company lost $10.8m in its first year and $9.1m the following year, burdened by excessive staffing costs.

The company says it is in turnaround mode now, having made major cost-cutting efforts.

Originally published as Mighty Kingdom to raise funds ahead of bid to spill the board