While everyone in chess seems fixated on cheating, a game-changing deal is looming over the game. Chess.com made a take-over bid for its rival Play Magnus Group (PMG) in late August. Even though Danny Rensch jokingly suggested that the first joint product would be “Tik-Tok videos with Magnus”, the announcement sent shockwaves through the chess community.
The bid was more a quarter over the latest stock notation and got the endorsement of the PMG management and several of its big shareholders, so it could be described as a friendly take-over. However, many fear that it will stifle competition in the online chess market and create one big player powerful enough to change the direction of competitive chess at a moment when the grip of FIDE over the game is weakened by its leader staying a Russian.
The take-over’s possible consequences only became a matter of debate when both Magnus Carlsen and Chess.com started to jointly accuse US junior Hans Niemann of cheating.“
It is far from certain though that the bid will reach the required 90% acceptance threshold from which remaining shareholders can be legally squeezed out and full control achieved in order to delist PMG from the stock market. Shareholders representing 80,7% of the shares accepted the offer by its original deadline. This deadline has thus been extended.
PMG CFO Dmitri Shneider told ChessTech “with the deadline now extended to November 2nd, we believe it should be enough time to overcome the logistical issues and get over the hurdle.” Shneider hints to delays in communicating with shareholders outside of Norway and especially those whose deposits are managed by Clearstream, which represents almost 8% of the shareholder base. Even if going through it will take longer than the 6 to 8 weeks that Chess.com expected.
Thorsten Cmiel, a financial journalist and FIDE-Master, says that many of those undecided or opposing shareholders are still trusting the guidance that PMG can become operatively profitable within the next months and reach $ 100 million in bookings by 2025 and based on that evaluate the company higher than 13 NOK (Norwegian Crowns) per share, which comes down to an overall valuation of 799 million NOK or at the current exchange rate $ 75 millon. This is about nine percent less than the $82 million when the offer was made public in late August.
Not even considering possible currency losses, the huge majority of investors bought in at higher prices than 13 NOK since PMG went public in October 2020 and would have to settle with a loss if the bid is accepted. “It could be worth waiting for a better offer”, Cmiel told ChessTech.
When the offer was made public the evaluation was $82 million, the strong dollar brought it down to $75 million.
Shareholders who own at least 307,264 shares, or 0,5% of the total, can choose between being paid out and getting new shares in Chess Holdings LLC, the future parent company if the take-over goes through. It is not known if world number one Magnus Carlsen has chosen to become a co-owner. It is also unclear how many and who of the staff will keep their jobs. The Play Magnus Group has restructured repeatedly earlier this year. 29 full-timers at Chessable, that is 100% owned by PMG, were fired in late June. Sales had gone below expectations since the war had started in February and the online chess boom has come to an end.
General Atlantic, a US investment company specialized in financing growth, had become a co-owner of Chess.com in January by acquiring the shares of the Scheinberg family. The take-over talks were reported to have started in late March. Its possible consequences only became a matter of debate when first Magnus Carlsen and then also Chess.com started to publicly accuse US junior Hans Niemann of cheating.