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Miami, FL—Motorsport Games, the video game developer known for its racing video games and esports events, has announced significant layoffs as part of a broader effort to cut costs and stabilize its finances. The company is laying off 39% of its global workforce, amounting to 24 employees and contractors across the United States and the United Kingdom. The layoffs come as the company also considers a potential sale or merger, according to a recent filing with the U.S. Securities and Exchange Commission (SEC).

Financial Restructuring and Layoffs

The decision to cut nearly 40% of its staff is part of a larger restructuring effort aimed at optimizing cash flow and reversing what the company described as "over-expansion" in previous years. Motorsport Games President and CEO Stephen Hood emphasized the need for these changes, stating, "The cost-cutting measures have optimized cash flow, allowing us to reverse prior over-expansion."

This marks the second major round of layoffs in just over a year for the Miami-based company, which slashed 40% of its workforce in 2023. It remains unclear how many employees in South Florida were affected by the most recent job cuts, as company representatives were not immediately available for comment.

A Business at a Crossroads

Motorsport Games went public in early 2021, debuting on the Nasdaq during a period of heightened interest in online gaming and esports due to the Covid-19 pandemic. At the time, the company capitalized on the growing ubiquity of mobile devices and the increasing popularity of video game streaming. Additionally, the global fanbase for motorsports created a unique demand for the company's digital racing products.

However, despite this initial success, Motorsport Games has faced significant challenges over the past year. In 2023, both the IndyCar and British Touring Car Championship racing organizations terminated their video game licenses with the company. In a further attempt to stabilize its finances, Motorsport Games sold its news platform, Traxion, for $250,000 in May 2024, as part of a strategy to focus exclusively on its core business—developing racing video games.

Potential Sale or Merger

Alongside the layoffs, Motorsport Games’ board of directors has authorized management to explore the possibility of a sale or merger. The company’s financial struggles and the recent termination of key licensing agreements have left it in a vulnerable position. CEO Stephen Hood expressed hope that the strategic restructuring could strengthen the company's financial outlook and make it more agile and efficient.

"These changes position us to become a more agile, focused, and efficient company—one that is conscious of our forthcoming operating requirements as well as within-reach growth opportunities," Hood said.

Stock Performance and Outlook

Despite the company's efforts to stabilize its business, Motorsport Games' stock has continued to slide. Shares were trading at $1.38 each on Monday afternoon, down 5% from the market's open. The company's future remains uncertain as it grapples with its restructuring efforts and explores potential strategic alternatives.

As the gaming industry continues to evolve, Motorsport Games must navigate its financial challenges while adapting to changing market conditions. Whether through a sale, merger, or internal restructuring, the company will need to chart a new course to regain its footing in the competitive world of video game development.

Video game developer Motorsport Games is considering a sale after announcing plans to lay off 39% of its global team.

The Miami company will cut 24 employees and contractors in the U.S. and United Kingdom to reduce expenses, according to a U.S. Securities and Exchange Commissionfiling. The firm's board of directors also authorized management to consider a potential sale or merger.

The "cost-cutting measures have optimized cash flow, allowing us to reverse prior over-expansion," president and CEO Stephen Hood said in a statement.

The layoffs come about a year after Motorsport Games, which develops racing video games and esports for official motorsport races, terminated 40% of its team.

It's unclear how many South Florida-based employees were affected by the most recent job cuts. A representative could not be immediately reached for comment.

Motorsport Games began trading on the Nasdaq in early 2021 after online gaming and esports viewership skyrocketed during the early part of Covid-19 pandemic. At the time, the business claimed the ubiquity of mobile devices and video game streaming, combined with a worldwide fanbase for car racing, had created new demand for digital racing products.

Since then, it has hit some roadblocks. Last year, the racing organizations IndyCar and the British Touring Car Championship terminated their video game licenses with Motorsport Games. In May, it sold its news platform Traxion for $250,000 in an effort to bring cash into the business. At the time, the firm reported it was moving away from verticals unrelated to its core business of developing racing games.

Hood said a strategic restructuring will give Motorsport Games an opportunity to strengthen its finances.

"These changes position us to become a more agile, focused, and efficient company," he said. "One that is conscious of our forthcoming operating requirements as well as within-reach growth opportunities."

Shares of Motorsport Games were trading for $1.38 each early Monday afternoon, down 5% from market open.