Lottery.com on Brink of Collapse After Raising Going Concern Doubt

Posted on: July 29, 2022, 04:21h. 

Last updated on: July 29, 2022, 04:55h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

On a strong day for the broader market, Lottery.com (NASDAQ:LTRY) shed nearly two-thirds of its value. That’s after the gaming company revealed in a regulatory filing it doesn’t have enough capital to survive a year.

Lottery.com
Mega Millions tickets. That jackpot is soaring, but Lottery.com is on the brink of collapse. (Image: CNN)

Shares of the internet lottery provider slumped 63.79% today on volume that was roughly 40 times above the daily average. The Friday slump extends the stock’s year-to-date slide to 87.21%. AutoLotto, which does business as Lottery.com, debuted as a standalone public company last November. That’s following a merger with special purpose acquisition company (SPAC) Trident Acquisitions Corp.

Prior to its debut as a public company, Lottery.com forecast a post-transaction enterprise value of $526 million, with $45 million in cash. Its market capitalization resides at $41.53 million following today’s shellacking. As detailed in a Form 8-K filing with the Securities and Exchange Commission (SEC), the gaming company is in a precarious financial spot and is laying off staff to conserve cash.

On July, 28, 2022, the Board of Directors of Lottery.com Inc. (the “Company”) determined that the Company does not currently have sufficient financial resources to fund its operations or pay certain existing obligations, including its payroll and related obligations. Accordingly, the Company intends to furlough certain employees effective July 29, 2022,” according to the filing.

Lottery.com acknowledges those staffers are owed $425,000 in outstanding pay and that if the company cannot compensate those workers, they could take legal action against the firm.

Lottery.com Could Be Dubious SPAC Collapse

Lottery.com’s merger with Trident was announced at the height of SPAC fever. That was prior to a stretch of significant retrenchment for blank-check equities with merger partners across multiple industries, not just gaming.

There was enthusiasm for the stock as it soared as high as $17.50 last November amid a bullish revenue forecast. At the time, the company was touting low customer acquisition costs and state-level expansion plans.

“From 2016 to 2020, Lottery.com grew gross revenue at a compounded annual growth rate of 322%, and forecasts gross revenue equal to approximately $71 million in 2021, $280 million in 2022, and $571 million in 2023,” according to the company.

In other words, things weren’t supposed to be this way. But the reality for Lottery.com is a stock that traded at $17.50 less than 10 months ago closed at 29 cents today, and its prospects for survival appear dubious.

“Additionally, the Company’s capital resources are not sufficient to fund its operations for a twelve-month period, and therefore, there is substantial doubt about the Company’s ability to continue as a going concern. If the Company is not able to secure additional capital resources or otherwise fund its operations, the Company will be forced to wind down some or all of its operations and pursue options for liquidating the Company’s assets, including equipment and intellectual property,” according to the 8-K.

Interesting Timing

These should be halcyon days for companies operating in the lottery industry, including internet firms that offer customers convenience.

On that note, it’s perhaps a cruel twist of fate that Lottery.com’s 8-K filing arrives on the day of a $1.28 billion Mega Millions draw – one of the largest jackpots in US lottery history.

Even after taxes, the winner of that pot could buy Lottery.com multiple times over.