(Bloomberg) --
Guild Esports Plc, which counts retired soccer star David Beckham among its investors, reversed early gains to drop as much 6.3% in its London debut after raising 20 million pounds ($26 million), riding the surging popularity of online gaming tournaments.
The stock was trading at 7.5 pence at 9:44 a.m. in London, having opened up nearly 13% from its issue price of 8 pence. The initial public offering values Guild at 41.2 million pounds, the company said Wednesday.
A sudden surge in IPO activity in Europe comes even as markets turn rocky with new virus infections in Europe and a fresh bout of tightened restrictions to curb its spread, fueling fears about the region's economic recovery. Still, so-called lockdown winners are increasingly turning to equity markets to cash in on their recent gains.
The fan base for esports is growing at a blistering pace, with video-game competitions already attracting a bigger audience than some physical sports championships, like Wimbledon and the Tour de France, the company said. While coronavirus-induced social-distancing measures have hit live attendance of sports events, online gaming has had no such restrictions to contend with.
New businesses have emerged from the Covid-19 pandemic that capitalize on the changes in habits brought about by the lockdown, according to Anthony Brockbank, corporate partner at Fieldfisher LLP, a legal adviser on the IPO. Brockbank expects more transactions in the esport space as interest in at-home leisure activities grows, he said in emailed comments.
Guild, the first esports franchise to join the London Stock Exchange, plans to set up and field teams of players to compete in four online games: Fortnite, CS:Go, Rocket League and FIFA. Proceeds from the share placing will be used to recruit gamers, invest in its brand and expand.
The company, established in September 2019, is also counting on Beckham to use his global influence and following to support its brand and business. Shareholders including Blue Star Capital Plc, which holds a 5.95% stake, have entered into a 12-month lock-in period.
Late last year, Counter-Strike world champions Astralis Group AS became the first pure-play esports team to float, raising 150 kroner ($24 million) in Copenhagen. The global esports market was estimated to be worth $1.1 billion in 2019 and is expected to expand to nearly $2 billion by 2022. That said, Astralis's stock has fallen by about half since listing in December.
The wider gaming sector is heating up this year, with at least four other companies looking to go public. Mobile casino app maker Huuuge Inc. and computer-game studio People Can Fly Group SA have filed prospectuses with the Polish regulator to sell shares this year, while Czech game maker Bohemia Interactive AS is weighing an IPO.
Activity in the sector has also extended to more old-fashioned games. A company, founded by four-time World Chess Champion Magnus Carlsen, which enables users to learn and play the board game, has applied to list on the Merkur Market in Oslo.
Zeus Capital and Mirabaud Securities arranged Guild's offering.
©2020 Bloomberg L.P.
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