Invitation to Subscribe for Class B Shares: Modern Times Group MTG AB

Modern Times Group (MTG) is executing a rights issue of up to 28,320,697 new Class B shares to raise approximately SEK 2,549 million. Existing shareholders are entitled to subscribe for five new shares for every twelve rights held at a price of SEK 90 per share. The subscription period is scheduled from January 27 to February 10, 2021, with the offering primarily directed at investors in Sweden, Denmark, Finland, and Norway. This capital raise is essential for the company’s liquidity, as it intends to use the proceeds to repay a SEK 1,800 million bridge loan and a vendor note incurred from recent acquisitions, including Hutch and increased ownership in InnoGames.

The company operates as a strategic holding firm focused on the gaming and esports sectors, employing a "Buy & Build" strategy to consolidate market positions. While the gaming vertical—comprising InnoGames, Hutch, and Kongregate—has demonstrated consistent organic growth and positive EBIT, the esports vertical, including ESL Gaming and DreamHack, has faced significant operational challenges and losses, exacerbated by the COVID-19 pandemic. The financial structure of the company has undergone substantial changes, including the separation of the NENT Group and the accumulation of debt to fund its aggressive acquisition strategy.

Failure to complete this rights issue poses a material risk, as the company faces a projected working capital shortfall and potential breaches of financial covenants within the next twelve months. Shareholders who choose not to participate in the offering face a maximum dilution of approximately 29.3% in shareholding and 27.9% in voting power. Beyond liquidity concerns, the company remains exposed to risks involving third-party licensing dependencies, the volatility of the esports market, integration challenges regarding its decentralized business model, and the retention of key technical talent.