A sale of assets to a subsidiary helped sports media company ONE Championship earn $ 341 million in profit for the fiscal year ended Dec.31, 2020, according to an investigative report from Bloody Elbow.
The company recorded the gains from a sale of $ 400 million of “intellectual property rights relating to combat sports and martial arts activities in the United States” to a Delaware-incorporated subsidiary called One Championship Inc, according to The report.
The intercompany transaction was an equal combination of cash and shares. The cash portion was unpaid as of December 31, 2020.
This financial engineering seems to have prevented the promoter of mixed martial arts from declaring another loss-making exercise. ONE, the report adds, would have reported a loss of $ 59 million in the absence of the $ 400 million deal.
The profit of $ 341 million was recorded at the company level. The ONE Championship group, which includes subsidiaries such as ONE Esports, ONE Warriors and ONE Studios, recorded a loss of $ 47.6 million for fiscal 2020.
ONE had raised $ 276 million from investors as of Jan. 1, 2021, it has also racked up $ 273 million in losses, which suggests its current operations are mostly based on $ 72 million in convertible notes raised last year.
Mission Holdings founder and director and investor Saurabh Kumar Mittal has funded S $ 14 million of these convertible notes at an interest rate of 15% per annum, Bloody Elbow added.
DealStreetAsia understands that the remaining convertibles were backed by Temasek Holdings, which is also one of ONE’s existing investors, but this could not be independently verified.
Does ONE change jurisdiction in the Cayman Islands?
The Bloody Elbow report pointed out that ONE’s latest financial statements were recorded in US dollars, against Singaporean dollars previously. The company also did not file its financial statements for fiscal year 2020 with the Singapore Business Accounting and Regulatory Authority (ACRA) as it had in previous years.
ONE established a Cayman Islands listed entity called Group One Holdings on August 6, 2021, suggesting that the Singapore-based company may choose to re-domicilate in the tax haven, which offers a more opaque structure compared to Singapore.
DealStreetAsia has contacted ONE for comment.
Urgent need for funds and exit?
Frustration at ONE appears to have eaten away at some of its own long-term investors, prompting two directors on the board to step down just a few months ago. Temasek Managing Director Fock Wai Hoong and Heliconia Capital Managing Director Derek Lau stepped down from ONE’s board in June.
ONE, meanwhile, continued to argue that moves have been made for the company to have the “right governance structure in place” as it prepares for a possible public listing. The company added that it had appointed Goldman Sachs and Credit Suisse as financial advisers and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel.
ONE was exploring a Special Purpose Acquisition Company (SPAC) merger to raise funds, according to a Bloomberg report earlier this year. DealStreetAsia understands that ONE’s SPAC conversations have seen little movement since then, with its chairman and CEO Chatri Sityodtong traveling to the Middle East to raise funds from private investors instead.
ONE Championship is backed by investors such as Sequoia Capital, GIC, Heliconia Capital, Mission Holdings and others. The company was at one point considered to be one of Singapore’s best emerging unicorns.