Starbreeze successfully completes rights issue raising SEK 453 million

Starbreeze announced yesterday that their rights issue was oversubscribed and that the company successfully raised the target amount of SEK 453 million before transaction costs. This outcome is in line with our expectations and sets Starbreeze up nicely going forward.

Out of the total proceeds, SEK 150 million will be used to settle the refinancing charge on their convertible loan. Together with the commitment from Digital Bros to convert their convertible loan into B-shares Starbreeze will become essentially debt free. The remaining proceeds of approximately SEK 267 million will be invested into internal game development and third-party publishing.

With the rights issue now concluded, attention again shifts to the anticipated release of PAYDAY 3 in late September. Although the success of PAYDAY 3 remains important, Starbreeze finds itself in a more secure position with the convertible loan taken care of. Even if the sales of PAYDAY 3 were to fall short of expectations, Starbreeze would possess sufficient funds to get started on the development of their next game, slated for release in late 2025 or early 2026.

According to the company the rights issue was subscribed for approximately 103% of the offered shares. The A series was subscribed for about 98% of the offered shares while the B series was subscribed for 104% of the offered shares. After the rights issue the number of outstanding shares in Starbreeze will increase to 1,328 million (725 million before), which represents a dilution of 45%.

With the completion of the rights issue, Digital Bros is poised to convert their convertible loan of SEK 215 million into B-shares. We estimate that the conversion will add 242* million new B-shares increasing the total number of outstanding shares to 1,570 million. This overall increase represents a dilution of 54% compared to the 725 million outstanding shares prior to the rights issue.

Following the rights issue, but prior to conversion of its convertible loan, Digital Bros will hold approximately 12% of the shares and approximately 30% of the votes in Starbreeze. However, after the conversion, our estimates suggest that Digital Bros would possess approximately 26% of the shares and around 34% of the votes. While this would surpass the mandatory bid threshold of 30% based on votes held, they can avoid this situation by converting their A-shares, which carry ten votes each, into B-shares, which hold a single vote each.

*Inderes estimate using the old conversion price adjusted for the dilution caused by the rights issue