As you know, Federated Sports+Gaming–the parent company of Epic Poker, Heartland Poker Tour, and the GPI–filed Chapter 11 bankruptcy last week (Wicked Chops Poker has obtained the filings and have linked them at the bottom of this post).
The move, according to management, was positioned as a “reorganization” as opposed to an “asset liquidation” (which would essentially be the end of Epic). Additionally, FS+G CEO Jeffrey Pollack claims in a statement that Epic has “full intention to complete, as planned, Season One of the Epic Poker League.”
Problem is, after reading the filings, we just don’t see how that’s possible.
In reading the bankruptcy docs, a few things are evident:
- With somewhere in the vicinity of $5-7M in debt, but only $15,000 in cash reserves, $115,000 in receivables (all from HPT), and $5,000 in other monthly income (mostly from the social media gaming app on Facebook), the chances of actually completing Event #4 (with its $400,000 overlay) and the $1M championship freeroll are somewhere between negative zero-and-zero percent.
- Examining their financial restructuring plan for March-May (document #5 in the below links), the company apparently plans to use revenue generated from HPT to keep the lights on. If that’s the case, it would be jeopardizing the value of its most important asset (HPT) to keep alive a company (Epic) that literally has no value whatsoever right now.
- Don’t be surprised if Pinnacle Entertainment ends up owning HPT (or tries to, at least). That $2M loan from Pinnacle was made in part to complete the HPT acquisition. Unless Pinnacle likes lighting $2M on fire, their only chance to recoup their loss is completing the acquisition of HPT themselves, making it bigger and better, and get some ROI on that loan. For what it’s worth, we’ve always believed a Pinnacle-HPT marriage made a lot of sense for both parties.
- Any company coming in to bail FS+G out, obviously, have to come up with a payment plan for its 100+ creditors. For a company in its infancy, that’s a massive number of creditors and amount of money owed. So if some miracle White Knight savior does emerge, don’t expect it to be business as usual for FS+G/Epic. Things will look vastly different.
- On that note, FS+G/Epic stiffed some really, really good people out of money. 441 is among the best in the biz. PR firm Rogers & Cowan is largely responsible for building the Epic hype machine and are top-notch. Individual employees like Kat Kowal, Lizzy Harrison, Allen Rash, Jay Newnum, all of HPT, and especially the Disabled American Veterans simply deserved better.
As we first wrote when FS+G launched, only about 10% of new business launches ever survive. Even start-ups with a solid business plan can get some unlucky breaks, or have their financing pulled, and everything goes South from there. So some of the shame in Epic isn’t that the business itself failed–it happens. The shame is that for a company so publicly touting its “long runway” of financing, and with such a top-heavy management team of supposed seasoned vets, they didn’t see the writing on the wall, make adjustments, and find a way to survive until market conditions improved.
They had the money to do it. They just chose not to, instead focusing on the sizzle instead of the substance.
For more on the story, read our initial Wicked Chops Insider take here. Las Vegas Review-Journal gaming industry reporter Howard Stutz also drew some interesting parallels between Epic and the UFL (read here).
And finally, here are the Federated Sports+Gaming bankruptcy filings (we uploaded the three most relevant):
- FS+G Bankruptcy Filing Doc 1 (Voluntary Petition, high-level overview)
- FS+G Bankruptcy Filing Doc 4 (Joint Application of Debtors)
- FS+G Bankruptcy Filing Doc 5 (Details financial restructuring plan submitted by FS+G)