Fresh moves in the board room

by ChessBase
1/17/2023 – Last month World Chess, the company that ran the World Chess Championships, announced its plans to float on the main London Stock Exchange in November, inviting institutional and retail investors to subscribe for eight million Euro shares. This comes at the heels of planned 483 million takeover of PlayMagnus by the giant What this all means is discussed by Peter O’Brien in the latest issue of The British Chess Magazine.

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For some time the BCM has been following developments on the entrepreneurial side of chess, in our “chess as a business” series of articles. So when World Chess - the company that ran the World Chess Championships - announced, on October 13 2022, that it was planning to float on the main London Stock Exchange in November, and issued a Prospectus inviting institutional and retail investors to subscribe for eight million euro shares, our interest was very much awakened.

The move has been in preparation for some time: in 2019 the company announced plans to issue a cryptocurrency-like digital token ahead of the stock market float.

The announcement follows on the heels of the end of August announcement that would buy the PlayMagnusGroup (PMG) for around $83 million, a figure a little above the market capitalisation of some $80 million with which PMG was originally placed (in October 2020) on the Oslo Stock Exchange.

That “exchange sacrifice” was not a surprise. PMG as a business has struggled for quite a while. Staff have been released, its live tournament commentaries are now just in two languages (English and Spanish), and although its stock price, as of late October, was around the mid-point of its 52-week range, the sense that the business model of appealing to higher-range players was not ideal became hard to ignore. Last but by no means least, the fact that the PMG core asset, namely Magnus Carlsen, is obviously reconsidering the role of chess in his own life, was bound to create significant uncertainties.

Getting back to World Chess, the company has made a strong announcement: “World Chess PLC, a leading chess organisation seeking to promote the mass market appeal of chess globally through the commercial offering of chess-related activities, is pleased to announce its intention to seek admission of its Ordinary Shares to the Official List and to trading on the London Stock Exchange’s Main Market for listed securities, and a placing of new shares to raise up to £10m.” The trading is set to start in November.

In a statement, World Chess CEO Ilya Merenzon noted that renewed interest in chess – thanks to the pandemic and the ‘Queen’s Gambit’ series – enabled the stock market float.

“There continues to be an explosion of interest in chess, which has accelerated through recent years and even more during the pandemic. To keep pace with this growth we are scaling up our operations and expanding our range of services internationally. ’We believe chess is the only remaining mass participation sport not yet fully benefitting from the creativity and investment of the commercial sector.”

The company is betting on its online platform where people can play online and get FIDE-rated points and titles.

As the financial website ‘This is Money’ noticed, there is no news if there has been interest from buyers in regards to the IPO.

Floating on the London Stock Exchange is a big deal in the financial world and, understandably, is surrounded by serious entry requirements and barriers. It remains to be seen how the attempt of World Chess will fare and whether or not it will be successful in attracting investors.

In the observations that follow, we are not going to say much about the financials of the World Chess listing – for the simple reason that they are scarce! The World Chess prospectus of 13 October provides very little ‘hard’ data, says nothing about risks, and indeed does not make it clear why such a small sum is invited from retail investors.

Instead of speculating about this specific flotation (after all we are not financial advisers!), we will offer some thoughts about what such a move indicates about the future of the game and its pull for public and institutional investors.

The start of the informatics age, the arrival of apps that allow players to compete against computers on their mobiles, the dramatic shift in chess thinking wrought by Alpha Zero, and the entry of chess into e-sports – all these have been stages marking a total revolution in the conception of what chess is, and thus in the nature of the appeal that the game might hold. Chess is by no means an exception in the realm of sports and games (SG) in being dramatically impacted and changed by technology. What has been at the heart of the new world of SG?

The answer is time and attention spans, coupled with the demand for immediate excitement and thrills, and a decline in the perceived importance of maintaining high standards of play above all else. Football, cricket, rugby, winter sports, not to mention screen showings of poker, have all ‘accelerated’ enormously. This transformation has brought with it three simple corollaries. First, if people are to watch, and still more pay to watch, then they will want definitive results (through penalty shoot outs, limited overs, or Armageddons) allied to spectacular play which not focused on the slow build up of tension. Forget the protracted struggles and sophisticated manoeuvres – we are talking immediate outcomes. Second, they will be attracted to betting on outcomes. Money can be staked on all sorts of variations, from becoming a virtual ‘football manager’ through to seeing whether Nakamura can win while playing under material handicaps at lightning speed. Third, attractive commentaries can entice the public even more. Can you beat the Botez sisters at scrambling eggs at the same time as handling a Dragon Sicilian on a 5-minute time limit? Maybe you used to like listening to Beethoven while thinking? If so, move on – now your King’s Indian can be enlivened by the latest jazz/salsa fusions.

Mostly played by individuals – though online and onscreen consultation games can be exciting - chess has always been very different from genuine team SG. Successful financial efforts in the team games have required overcoming much more significant entry costs, far higher fixed costs, substantial running costs, and operations on a major scale if the public is to pay. Thus firms have been formed, with ownership models covering everything from ‘member ownership’, to PLCs, to private equity control. The competitions operated in these settings have been subject to rules agreed upon by the participants (clubs) and have developed enormously over time. Chess has entered this world in a real sense only during the present century, and change has been most impressive within the last few years. In short, we are still experimenting and growing familiar with an environment (ecosystem, to use fashionable jargon) that compels all of us to shape our own perspectives.

One thing seems evident. Like other SG, chess is not an island. Its progress is not determined entirely, or even mostly, from factors internal to the game. Historically, we might say that there has been a search for ever greater knowledge about the game and its secrets. “Theory” of openings and endings, studies and compositions, have been developed with the purpose of shedding more light on how best to play. But is this still the prime driver, the “goal” to which players strive? A quick response might be “yes” for elite players, while much less so for others. It’s probably correct to assert that this difference has always existed, well before the changes and business focus we are now experiencing.

The current environment is, all the same, quite distinct from the past. Before the game had occasional high points, such as major tournaments and world championship matches, occurring at discrete intervals. But the current setting is of continuous and dense activity, where large numbers of people are spending time and money on the game. When Nakamura can generate upwards of one million followers on his live streaming, then you are talking serious business.

This global vision of chess is possible because of ever-changing technology, available at low cost to most individuals, of the marketing of chess as entertainment, and because money is at the centre of things. As someone who dedicated time and money to playing blitz chess in the “Kaffee Haüser” of Vienna, I can understand the attraction of this kind of approach. The idea of doing that from your own home does not appeal to me personally (I find the face to face contact more stimulating), but, as the Italians say, “de gustibus” - each to her own. Seen from the angle of business, this setting has countless positives. A firm can introduce all sorts of technological twists and see how they function. It can pull in plenty of advertisers, and the cash that comes with them. It can link with other companies who may have separate primary markets but can envision that operations in the chess field could create fresh products and insights.

The initiatives taken recently by World Chess thus should be assessed in this far broader and futuristic way. There are a lot of questions to answer and challenges to overcome: the company was previously criticized by a part of the chess community for its dealings with the previous FIDE leadership, and it has a lot to do to improve its image. The core questions is, of course, will the market see the value and potential of investing in chess?

The company clearly considers that it is tapping into an area where there is plenty of scope for technical and business innovation. Perhaps participants/spectators/gamblers (and sometimes an individual may be all three) will be enticed to play other related games, or even new ones that are invented along the way. Who knows?

The above article appeared in the November 2023 issue of The British Chess Magazine, the world's oldest chess publication. It is reproduced with kind permission.

BCM covers the international and British chess scene. In a blend of current event coverage and thought-provoking analysis of the chess world’s most topical issues, BCM gives readers what they need to understand and enjoy the Royal Game and its wider context in society.

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