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Blue Star Capital plc

Blue Star Capital plc Placing and Multiple Investments in Esports Opportunities

Blue Star Capital plc (LON: BLU), the investing company with a focus on technology and its applications within media and gaming, is pleased to announce that it has conditionally placed 900,000,000 new ordinary shares of 0.1p each in the Company at a placing price of 0.1p per Placing Share to raise in aggregate £900,000. The net proceeds of the Placing will be invested in certain esports opportunities described below.

The Placing, which has been carried out by Smaller Company Capital Limited, the Company’s broker, on behalf of the Company comprises two elements:

1 a firm Placing of 450,000,000 Placing Shares at the Placing Price to raise in aggregate £450,000 conditional only upon the completion of the first part of the Investment Agreement (detailed below) and the admission to trading of those Placing Shares on AIM; and

2 a conditional Placing of 450,000,000 Placing Shares at the Placing Price to raise in aggregate £450,000 conditional on: (i) the First Placing having completed; (ii) resolutions having been passed at a general meeting of the Company granting the directors of the Company authority to issue and allot the relevant Placing Shares and certain warrants to subscribe for Ordinary Shares (as outlined below); (iii) the completion of the second part of the Investment Agreement (detailed below); and (iv) the admission to trading of those Placing Shares on AIM.

The Company has entered into an investment agreement under the terms of which it will make investments of approximately £150,000 each in six esport companies. The first part of the Investment Agreement (which will complete upon First Admission) relates to an investment of approximately £450,000 in three esport companies. The second part of the Investment Agreement (which will complete upon Second Admission) relates to an investment of approximately £450,000 in three further esport companies.

It is anticipated that First Admission will occur on or around 18 October 2019 and that application will be made for Second Admission shortly after the General Meeting. The Placing Shares will rank pari passu in all respects with the existing Ordinary Shares in issue including the right to receive all dividends and other distributions declared, made or paid after their date of issue.

A circular, containing a notice of the General Meeting at which the Resolutions will be proposed, will be posted to Shareholders in the Company in due course.

Tony Fabrizi, Chief Executive Officer, has invested £20,000 as part of the First Placing. Following his investment, Tony Fabrizi’s holding in the Company will comprise 62,000,000 ordinary shares, representing 2.3 per cent. of Blue Star’s enlarged share capital. Derek Lew, who the Company is proposing to appoint as Chairman, subject to normal regulatory due diligence, has invested £100,000 in the First Placing. Further details on Mr Lew are set out below.

Background to the Transactions and use of proceeds

The Company believes that a significant opportunity exists within esports which, according to estimates by games and esports analytics provider Newzoo, may see total global esports market revenue increase to US$1.1 billion for 2019. The largest component of this estimate relates to sponsorship, media rights and advertising and the Company will take advantage of this growth opportunity by investing in franchises and infrastructure investments targeting different regions globally.

An opportunity has been presented by Jonathan Bixby (through his company Toro Consulting Ltd, the “Introducer”), who founded and listed Argo Blockchain plc by way of a Standard Listing on the London Stock Exchange’s main market on 3 August 2018, to invest in six esports businesses which are being developed. These investment opportunities are in line with the Company’s investing strategy of investing in gaming. Esports encompasses competitive, organised gaming and has seen a significant growth in recent years in terms of the number of events, the number of competitors and audience viewing and, importantly, revenues generated through activities including ticket sales, merchandising, media rights and partnerships.

It is the intention of each of the companies in which Blue Star will invest to create or acquire a competitive esports franchise to generate revenue from tournament winnings, digital marketing opportunities, sponsorship, membership, merchandise and promotional tours and events. Each of the companies is targeting a different region globally for financing and team building but all will attempt to become global brands. Blue Star is investing at an early stage in each of these companies and as part of its investment Blue Star has secured the right to invest in future rounds of each company to allow it to maintain its position, if it so chooses.

Further details of the companies in which Blue Star will invest are as follows:

CompanyInvestmentJurisdiction
The Lords Esports plc£150,000 representing 11.1 per cent. of the issued share capital of The Lords Esports plc UK
Googly Esports plc£150,000 representing 11.1 per cent. of the issued share capital of the Googly Esports plc India and UK
The Dibs Esports Corp$185,000 (USD) by way of a convertible loan note which Blue Star may convert into equity securities in accordance with the terms of the loan note and which, on conversion, will represent approximately 13.7 per cent. of the issued share capital of The Dibs Esports Corp USA
Dynasty Esports PTE Ltd$255,000 (SGD) to be invested, conditional upon completion of the Conditional Subscription, which will represent 13.7 per cent. the issued share capital of Dynasty Esports PTE Ltd Singapore
The Cubs Esports PTY Ltd$250,000 (AUS) to be invested, conditional upon completion of the Conditional Subscription, which will represent 13.3 per cent. of the issued share capital of The Cubs Esports PTY Ltd Australia
The Drops Esports Inc$250,000 (CAD) to be invested, conditional upon  completion of the Conditional Subscription, which will represent 13.3 per cent. the issued share capital off The Drops Esports Inc Canada

Update on Blue Star

The Company’s main investment is SatoshiPay, where it currently owns 27.9 per cent. of the issued share capital. Based on SatoshiPay’s most recent fund raise in March 2019, Blue Star’s investment is valued at approximately £4.6million.

SatoshiPay has spent much of 2019 refining its product offering and developing a number of technical features of its business, most notable the Solar wallet, international VAT compliance tools for its publishers and a login-based cross-device wallet backup.

In addition to its offering for the publishing industry, SatoshiPay is broadening its reach into other verticals and intends to expand its services within the cross-border B2B payments vertical which is currently estimated to be a £160bn market. Although in its infancy, SatoshiPay is already engaged in a number of customer conversations and while this sector remains highly competitive the opportunity to exploit SatoshiPay’s existing technology appears to be strong. SatoshiPay will continue to develop its publishing vertical as it has a number of key relationships within this sector and anticipates announcing transactions later this year.

In addition to its investment in SatoshiPay, Blue Star has a 1 per cent. shareholding in Sthaler, a biometric payments business. Sthaler has recently announced a major initiative in Manchester and is continuing to attract interest both commercially and from investors. The Company’s board remains confident in Sthaler’s long term potential.

Finally, the Company’s investment in Disruptive Tech Limited has continued to disappoint and it seems likely that the position will be further written down with the publication of the Company’s accounts.

Grant of Warrants

In consideration of the Introducer introducing the investments to the Company and to provide the Company with potential future funding and in respect of incentivisation of directors, the Company has agreed to grant warrants to subscribe for Ordinary Shares to the Introducer and to Tony Fabrizi, Chief Executive Officer and Derek Lew.

On completion of the First Placing, the Company will grant, (subject, in the case of Derek Lew, to him being appointed as a Director) Warrants as follows:

Exercise priceNameWarrantsTerm from date of grant
    
0.1pToro Consulting Ltd220,000,0006 months
 Tony Fabrizi25,000,00012 months
 Derek Lew55,000,00012 months
  300,000,000 

The Company will (subject, in the case of Derek Lew, to him being appointed as a Director and the passing of the resolutions granting the directors of the Company authority to allot shares) grant further Warrants as follows:

Exercise priceNameWarrantsTerm from date of grant
    
0.175pToro Consulting Ltd220,000,00012 months
 Tony Fabrizi25,000,00018 months
 Derek Lew45,000,00018 months
  290,000,000 
    
0.25pToro Consulting Ltd180,000,00018 months
 Tony Fabrizi15,000,00024 months
 Derek Lew30,000,00024 months
  225,000,000

Proposed Appointment

The Company is proposing to appoint Derek Lew to the Company as Chairman of the Board. The appointment will be subject to normal regulatory due diligence and a further announcement will be made at the time of the appointment.

Derek Lew has advised, started and invested in technology companies for over 20 years. An active member of the technology community in Vancouver, he is President & CEO of venture capital fund manager GrowthWorks Capital Ltd. Derek is a Partner with Initio Group, a Vancouver, BC-based early-stage angel investment firm. Derek started his technology career as a lawyer, advising both technology companies and investors in all areas, including life sciences, ITC and e-commerce.

As Past-Chair of Innovate BC (formerly the British Columbia Innovation Council), the Crown Agency of the Province of British Columbia mandated to accelerate technology commercialization, Derek supports entrepreneurs and technology start-ups.

Derek holds a Bachelor of Arts from the University of British Columbia and a Bachelor of Laws from the University of Alberta.

Related Party Transaction

The grant of warrants to Tony Fabrizi, Chief Executive Officer, and to Derek Lew, upon his appointment as a director, and Tony Fabrizi’s participation in the First Placing are deemed to be a related party transactions for the purposes of Rule 13 of the AIM Rules for Companies. The Directors, with the exception of Tony Fabrizi, consider, having consulted with the Company’s nominated adviser, Cairn Financial Advisers LLP, that the terms of the transactions are fair and reasonable insofar as the Company’s shareholders are concerned.

Total Voting Rights

Following the issue of the Placing Shares pursuant to the First Placing, the Company will have 2,692,582,852 Ordinary Shares issue. There are no Ordinary Shares held in treasury. The figure of 2,692,582,852 may be used by the Company’s shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules.

Tony Fabrizi, Blue Star Capital Chief Executive Officer, said,

“We have been watching the development of the esports sector of gaming closely and the rate of growth in popularity and, importantly, associated revenue being generated presents a significant investment opportunity. We are investing at an early stage and not restricting our focus to a particular region or jurisdiction as we consider this to be the best opportunity to capture value for all shareholders.”