MSGM - Motorsport Games (MSGM) - An Unexpected Fallout

Updates its risks. The company highlights additional risks related to its operations in Russia and the recent sanctions put on that country by Canada, the United Kingdom, the European Union, and the United States, among others. The company has significant operations in Moscow with a large number of engineers for its games.Significant adverse impact. The company does not have the ability to pay its Russian staff for its future game development. It will take time for the company to add staff in its other locations outside of Russia. As such, we believe that there will be substantial delays in the delivery of new games.Currency risk. The company indicated that it has currency exposure given its limited ability to convert to other currencies. The significant and rapid devaluation of the Russian currency to the US dollar is likely to have a a material adverse effect on its business and financial condition and results of operations. Uncertain outlook. Management indicated that the prospect of a prolonged conflict in the Ukraine could lead to more extensive sanctions which could have a material adverse effect on its operations, financial condition, liquidity and business outlook. As of Sept. 30, the most recent financials available, the company had $22.1 million in cash. We believe that the situation may lead the company to seek additional capital. We are lowering our financial assessment from 2.0 checks to 1.0.Changing rating. Investors should not rely on our previous estimates for the company. Given the current lack of revenue visibility and the likely financial impact of the recent events, we are changing our rating from Outperform to Market Perform. Read More >>