Former Mighty Kingdom CEO sells off shares, scopes out class action after "catastrophic failure"

Former Mighty Kingdom CEO sells off shares, scopes out class action after "catastrophic failure"

Former Mighty Kingdom CEO Shane Yeend has wound down his holding from 14.32 per cent to 1.69 per cent.

Correction (17 April 2024): An earlier version of this article described the $6.2 million capital raise as a failure, based on the low shareholder participation that secured less than one sixth of that amount, however a retail shortfall bookbuild that followed was able to successfully meet funding targets outlined by the Mighty Kingdom board. 

Serial entertainment and gaming industry entrepreneur Shane Yeend has all but liquidated his substantial holding in Adelaide-based game developer Mighty Kingdom (ASX: MKL), shortly after the company failed to garner enough support for a planned $6.2 million raise that only managed to scrounge up just over $1 million from shareholders.

However, a retail shortfall bookbuild afterwards was able make up the difference with $5.2 million raised.

One of Yeend's businesses, Gamestar, took a stake in Mighty Kingdom as part of a restructure and $7 million placement in August 2022, with the new investor waxing lyrical at the time about getting the company to profitability quickly.

It wasn't long before founder Phil Mayes announced in January 2023 that he would be stepping aside from the CEO role, to be replaced by Yeend in May of that year.

But Yeend's tenure was short-lived as he resigned four months into the job in September, with Mighty Kingdom terminating its share subscription with Gamestar in October, and Yeend then staging a board spill that got rid of chair and former ABC boss Michelle Guthrie.

Mighty Kingdom has maintained that Gamestar owes it $2.4 million in unpaid shares and game development work, but in a letter following the share sale Yeend has hit out at the company.

"Gamestar Studios was an agreed takeover/change of control, they took all the money they could get from us and had no intention on delivering on the share subscription agreement (SSA)," he said in a letter to shareholders titled Game Over, in which he has also canvassed investors over a possible class action.

"The SSA was designed to give Gamestar Studios effective control and put an end to the burn, which they failed to share with you ‘the shareholders’.

"This will become the core of a class action for all shareholders against the company and its directors and officers."

The Mighty Kingdom class action page, which is still in an exploratory stage, is calling for interest from shareholders who purchased shares between 4 August 2022 and 15 March 2024.

"The claim is based on allegations that Mighty Kingdom engaged in misleading or deceptive conduct and contravened its obligations of continuous disclosure of price sensitive information, by the statements it made or failed to make regarding its true intentions in respect of Gamestar’s strategic investment in Mighty Kingdom," the page shared by Yeend states.

As per an announcement on Friday, via different entities including Gamestar Studios and another of Yeend's companies, Imagination, the entrepreneur has reduced his voting power from 14.32 per cent to 1.69 per cent.

"I am greatly disappointed to update you that I decided to sell almost all our shareholding in ASX: MKL," he wrote in the letter.

"We currently hold approximately 1.69% and will just absorb the substantial circa >$2.5M loss and what was more valuable, two years of time leveraging global gaming relationships to achieve a solid plan which we continue to execute, just not with Mighty Kingdom Limited. If nothing else, I have learned from the experience. 

"Imagination however hold $137,000 of the convertible note due to be converted at the EGM (extraordinary general meeting) called by the board of directors on 31 May 2024."

Yeend said he felt "great responsibility" to each shareholder that backed Mighty Kingdom's journey with hard earned cash because of him and his experience in global gaming innovation and success.

"God, I tried, I gave it everything I had day and night, meetings, and calls with so many of you," he said.

"So many of my friends, colleagues and even my own GP put hard earned money into this company.

"When I can make that up to you all for backing our plan, I will. Gamestar+, Imagination and a consortium of others who are all still working together to deliver a portfolio of profitable global gaming companies including vending in our own that would create the largest gaming­­ company in Australia by a country mile."

In the letter he claimed that after listing on the ASX, the Mighty Kingdom board and management "have delivered nothing short of a catastrophic failure in providing anything of value, burning what must be today close to $40 million with nothing to show for it.

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