Gfinity (LON: GFIN) shares are down another 25% this morning. On the basis that the company has announced a reorganisation. A reorganisation which, essentially, means scrapping the business and starting all over again. Who knows, maybe it might even work this time around. Now, of course, we could be considered to be cruel in our putting it all that way. But we don't think so, for really, that is pretty much what is being done.
As the announcement says “announces the divestment of 72.5% of Athlos, a subsidiary of the Company, to Tourbillon Group UK Limited.” Well, OK, but that was for the princely sum of £1. The reason for doing so? To get the cash drain off the Gfinity books and balance sheet. That's not a grand sign of success. “In the year to December 2022, Athlos generated revenue of £0.4m, with a loss before tax of £0.5m. If capitalised development expenditure is added back, the loss before tax was £1.2m.” Well, yes, OK. It doesn't stop there either: “The Company also today announces that it is closing down its Esports division” Oh.
“The above restructuring will allow the Company to focus on digital media and its significant position in the Gamer website industry. After a large dip in users in 2022 due to some adverse market impacts including changes in the Google Search Engine, the Company has performed a round of cost cuts and improvements in it content as it streamlines the Editorial team and makes strategic hires in SEO and tech, to increase user numbers. Part of this plan includes the deployment of AI automation tools to reduce the cost of specific items of content creation.” Ah.
Gfinity share price from London Stock Exchange
We can simplify that statement. They're going to use Chat GPT to write articles for them. Which will then be found by people using Google Search, and then that traffic will be monetised. So, they're resting the business on being able to continue to monetise the Google search algorithm - exactly the thing where recent changes gutted the business.
This could also be said to be doubling down on failure - or at least risk. Our own best guess here is that Google is going to continue to change that search algo to keep as much as possible of AI derived content out of search results. Now, maybe we're wrong on that but that is the way we roll on this issue.
“We will update the shareholders shortly on a more detailed strategy.” Well, yes, OK. but we've really not been cruel in our description there. They've gutted the Gfinity business and are pretty much starting from scratch all over again.