Motorsport Games, the developer behind Le Mans Ultimate and other racing titles, has suffered another round of layoffs. According to sources, the latest cuts have affected the studio’s social media and marketing departments, with around 10 employees let go.
Financial Woes Continue
Despite efforts to secure investors, the studio has yet to find substantial funding. A source close to the matter revealed, “They’re trying, but they need more than what they’re getting.”
Upcoming Shareholder Meeting
Motorsport Games has scheduled a Special Meeting of Stockholders on October 25 in Miami, Florida. The meeting will include a vote to approve the purchase of up to 949,310 shares of Motorsport Games Class A Common Stock, potentially generating $1.5 million in funding.
What is a Share Buyback?
A share buyback, also known as a stock repurchase, occurs when a publicly traded company uses its own funds to purchase its outstanding shares on the open market.
Why Do Companies Buy Back Shares?
Companies may buy back shares for various reasons:
1. Boost Stock Price: Reducing the number of outstanding shares can increase earnings per share (EPS) and potentially boost the stock price.
2. Offset Dilution: Buybacks can counteract the dilutive effect of employee stock options or other share-based compensation.
3. Return Value to Shareholders: Share buybacks can return capital to shareholders, especially when the company has excess cash.
4. Defend Against Takeovers: Reducing the number of outstanding shares can make a hostile takeover more difficult.
5. Signal Confidence: Buybacks demonstrate management’s confidence in the company’s financial health.
How Share Buybacks Work
1. Authorization: The company’s board of directors authorizes a share buyback program.
2. Funding: The company allocates funds for the buyback.
3. Open Market Purchases: The company buys its own shares on the open market.
4. Retirement: The purchased shares are retired, reducing the number of outstanding shares.
Effects of Share Buybacks
1. Reduced Share Count: Fewer shares outstanding.
2. Increased EPS: Higher earnings per share.
3. Potential Stock Price Increase: Boosted stock price due to reduced supply.
4. Cash Outflow: The company spends cash on share purchases.
5. Reduced Cash Reserves: Lower cash reserves.
Potential Drawbacks
1. Overpayment: Buying back shares at inflated prices.
2. Debt Increase: Financing buybacks through debt.
3. Opportunity Cost: Diverting funds from other investments.
4. Insider Enrichment: Benefiting executives and insiders at the expense of other shareholders.
Keep in mind that share buybacks can be beneficial or detrimental, depending on the company’s motivations, financial health, and market conditions.
Previous Setbacks
This isn’t the first time Motorsport Games has faced financial difficulties. In October 2023, the company sold its NASCAR license to iRacing and lost the Indy Car game development license.
No Official Comment
Motorsport Games has not responded to multiple requests for comment on the layoffs and the company’s current status.