Four vice president level executives at the publicly-traded esports and gaming media company Enthusiast Gaming authored a letter to Enthusiast’s board of directors, requesting that the board ask CEO Adrian Montgomery to resign. In the letter, which was viewed by The Washington Post, the group cites failures around strategic planning and equity distribution, as well as issues relating to staffing the company’s human resources department, as threats to Enthusiast’s long-term well-being.
In letter to board, Enthusiast leadership asks CEO to step down
The letter followed a contentious private call held June 23, during which a larger group of executives at Enthusiast asked Montgomery to resign, according to current Enthusiast employees familiar with the discussion. The confrontation took place during a scheduled weekly meeting for executive leadership and was attended by the company’s c-suite, as well as several vice presidents at the company.
Three of the letter’s signatories declined to comment when contacted by The Washington Post. One signatory could not be reached.
“Enthusiast Gaming values each and every single one of its committed employees,” wrote Eric Bernofsky, Enthusiast’s chief corporate officer, in a statement to The Post. “The fact is since our current leadership joined, we have dramatically improved our financial performance and significantly increased our standing in the public markets.”
For Enthusiast, which owns a number of video game focused publications and brands, such as Upcomer and Addicting Games, as well as the esports organization Luminosity Gaming, the internal call for the CEO’s resignation follows a month of bad news. On May 24, the investment firm Greywood Investments, Enthusiast’s largest shareholder, announced a campaign to replace the CEO and the board of directors with its own slate of nominees, citing “grave concerns” over the Toronto-based company’s direction.
“Greywood had no involvement in any meetings or letters between the senior leaders and CEO of Enthusiast,” said Joel Shaffer, a spokesperson for Greywood, in response to questions from The Post.
In his statement to The Post, Bernofsky suggested Greywood’s campaign was at odds with the best interests of other shareholders.
“Greywood Investments, a newly formed entity running a proxy battle against Enthusiast Gaming, has no plan, no financing and no management team to lead the company,” Bernofsky said. “Masking these facts, Greywood has resorted to a campaign of distortion, imperiling shareholder value in the process. Enthusiast is confident in the support of its shareholders for its strategy to build the largest media and content platform for video game and esports fans to connect and engage worldwide.”
In the Thursday executive leadership meeting, Montgomery was questioned about the distribution of equity to staff. The CEO told attendees that in 2022, approximately 80% of restricted stock units, which are traditionally granted as incentives for employees, were distributed to the board and c-suite, according to a current Enthusiast employee familiar with the discussion. In the letter to Enthusiast’s board, that 80% figure is mentioned as a factor in the group’s decision to seek Montgomery’s resignation.
The executives who confronted Montgomery on the call conveyed to the CEO they felt the company was adrift, and said they believed leadership was not following through on strategic objectives, according to multiple current Enthusiast employees familiar with the content of the call.
In March, Enthusiast abruptly laid off a significant portion of the editorial staff at its esports and gaming news website, Upcomer. The layoffs followed dramatic changes in traffic goals for the team, as well as the sidelining of former Enthusiast founder Menashe Kestenbaum, who initially championed the vertical, according to Digiday. Kestenbaum declined comment for this article, citing the advice of his lawyers.
Similarly, on June 2, Luminosity Gaming, a subsidiary of Enthusiast, unexpectedly announced it would be leaving competitive “Valorant.” At the time, their “Valorant” team was in the midst of one of its best performances to date, making it to the North American playoffs in the Valorant Champions Tour. On Monday, the high-performing Luminosity roster and its coach were transferred to a different organization, Shopify Rebellion.
“The company is truly not operating at 100% capacity,” said one current Enthusiast employee, who spoke on the condition of anonymity because they were not authorized to speak with press. “We have employees who I know are fielding job offers. I’m getting job offers. Because even though the economy’s turning down, we have some really good people at Enthusiast.”
On June 7, Greywood announced it intended to nominate Shinggo Lu, a current Enthusiast employee and the co-founder of U.GG, a “League of Legends” analytics platform and a recent Enthusiast acquisition, to the new board. Lu shared the news in an Enthusiast Slack channel with over 250 employees, entreating other employees to ask him questions, and sparking a spirited but largely cordial conversation between staff and some members of the company’s leadership over Enthusiast’s direction and treatment of employees, according to messages viewed by The Post.
Some of Lu’s posts were later deleted. In a message shared to the channel and viewed by The Post, Lu wrote: “The posts above have been removed as I have been advised they are defamatory and full of misrepresentations. I apologize for inadvertently contributing any misinformation on this employee channel.”
On June 13, Enthusiast announced its own slate of proposed board members, including six incumbent directors and three new nominees. Only one director declined to seek reelection: Francesco Aquilini, the Canadian investor whose family business, the Aquilini Investment Group, owns the Vancouver Canucks NHL team.
“I am thankful for my time on the Board and know that the Company’s directors and management will continue to drive growth,” Aquilini wrote in a statement. “Shareholders should be excited for the future of Enthusiast Gaming — the right team is in place to take the Company to the next level.”
Filings to the Securities and Exchange Commission in the first five months of 2022 show Greywood acquiring increasingly large stakes in Enthusiast. In those filings, Greywood is described as an investment manager for a company called Vantage Trading and a number of other investment vehicles chiefly managed by the investors Sasha Szabo and Marc Preston.
Source: WP
