Motorsport Games' Mixed Q4 Results Fails To Move Needle In Its Favor, Analyst Sees Value In IP Racing Portfolio

Benchmark analyst Mike Hickey had a Hold rating on Motorsport Games Inc MSGM.
MSGM delivered mixed Q4 financial results, with a disappointing consensus view on revenue but exceeding profitability.
MSGM reiterated its need to raise capital shortly.
As of December 31, 2022, MSGM had an adjusted cash balance of approximately $6.5 million, up from $3.2 million in Q3.
MSGM’s estimated monthly cash burn rate is $1.6 million.
MSGM’s FY22 Form 10-K discloses substantial doubt about the MSGM’s ability to continue as a going concern.
Based on the available cash on hand and the MSGM’s average monthly net cash burn, MSGM does not believe it has sufficient liquidity to fund its operations for the remainder of FY23.
MSGM is evaluating new funding sources, including discussing potential debt and equity financing arrangements and additional financing from its majority shareholder.
MSGM announced the 2022 Restructuring Program last quarter to reduce operating costs, likely generating annualized cost reductions of approximately $4 million by the end of FY23. MSGM has achieved annualized savings of roughly $2.5 million and is continuing efforts to achieve further cost reductions.
In 4Q, MSGM released NASCAR Rivals on the Nintendo Switch, a 2022 content update for NASCAR 21: Ignition, and delivered 3 of the 5 total rounds launching for the 2022-2023 Le Mans Virtual Series. MSGM will likely roll out NASCAR, INDYCAR, BTCC, and Le Mans games in 2023 and 2024.
Hickey believes MSGM has significant value in its IP racing portfolio but has struggled to realize high-quality game experiences and has now limited operational flexibility.
Price Action: MSGM shares traded higher by 1.47% at $5.53 on the last check Tuesday.

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