GameSquare secures $20m Pre-Paid Advance Agreement

Esports and gaming holding company GameSquare Holdings announced a $20m (~£15.61M) Pre-Paid Advance Agreement (PPA) with an investment fund managed by Yorkville Advisors Global L.P.

Following the transition, Gamesquare intends to repay the $5.7m (~£4.45m) balance on its senior secured convertible note with King Street Partners LLC.

A Pre-Paid Advance Agreement is a financial instrument where a company receives an upfront payment from an investor or lender in exchange for future rights or assets. One of the peculiarities is that the PPA often includes convertible debentures or other debt-like instruments that can be converted into equity under certain conditions.

According to the release, Yorkville has advanced $6.5m (~£5.07m) in the form of a convertible debenture which will be purchased by Yorkville at 93% of the face amount (~$6.05m) with 0% interest. The advance will have a fixed conversion price of $1.375 (~£1.07), meaning that Yorkville can convert the debenture into shares of GameSquare at the conversion price.

Interestingly, any advances above the initial $6.5m figure are at the complete discretion of GameSquare.

Justin Kenna, CEO of GameSquare, commented: “Today’s announcement is the culmination of our efforts over the past seven months to strengthen our balance sheet – primarily through non-dilutive sales of non-core assets.

“I am also pleased to announce that we intend to repay our outstanding senior secured convertible note balance with King Street. With a strengthened balance sheet and capital position, we have the financial resources in place to support the growth strategies we are pursuing and take advantage of growing demand trends currently underway across our global markets.”

GameSquare is a publicly traded esports and gaming holding company that owns Code Red Esports, StreamHatchet, Fourth Frame Studios, and several other companies. After acquiring FaZe Clan in February 2024, it launched FaZe Media, a creator-led media company for FaZe Clan’s IP, and sold 25.5% of the company to FaZe Banks, one of FaZe’s original founders.

From a financial perspective, GameSquare recorded revenues of $17.7m (~£13.9m) and a gross profit of $3.4m (~£2.7m) for Q1 2024, with a net loss of $5.3m (~£4.2m). Despite the initial downside, the company is expected to improve profitability and increase revenue growth in the second half of the year.