tinyBuild Inc (LSE:TBLD), the indie video game developer behind the popular ‘Hello Neighbor’ games, has warned investors it may fall into bankruptcy – if a funding and stake sale to Atari is not ratified by shareholders.
The company has urged its shareholders to back proposals to raise new equity, ahead of a vote next week.
It is asking investors to vote in favour of resolutions that will allow a conditional US$14 million funding round, announced on 21 December, to be completed.
Atari will subscribe for around US$2 million of the new equity being sold by the game developer, whilst existing tinyBuild shareholders would be putting in US$2.16 million – and the balance will come from other investors.
Today, tinyBuild cautioned that if the equity raise is not approved by shareholders it would have to seek emergency financing and whilst chief executive Alex Nichiporchik has indicated he is willing to support the company, no terms have been agreed.
“If all the resolutions are not passed at the special meeting, the fundraise will not take place and the proceeds of the fundraise will not be received by the company," tinyBuild said in a statement.
“In particular, failure to conclude the fundraise will materially compromise the group's ability to meet its financial obligations as they fall due and, in the opinion of the board, likely result in the group entering into a chapter 11 bankruptcy or some other form of insolvency procedure without alternative funding under which the prospects for recovery of value, if any, by stockholders would be uncertain.”
The meeting takes place on Tuesday 16 January, though the company noted that nominees and brokers may have earlier internal deadlines in order for some shareholders to cast their vote by proxy.
The company meanwhile noted that a major shareholder, Swedbank, had on 11 January notified the company that it had reduced its holding to below the 5% threshold on 11 October 2023, and to below the 3% threshold on 13 October 2023.