The Inside Pocket #3

ONE Championship is a super cool brand but has so much to hide

An interesting development took place at ONE Championship recently.

After more than 10 years of continuous domiciling out of Singapore (while raising and spending a ton of cash from Temasek, Heliconia Capital, Sequoia Capital and others), the Asian MMA media firm has now opted for the more opaque jurisdiction of the Cayman Islands.

Few people are aware that DealStreetAsia (the media outlet I write for) and Bloody Elbow (a US-based MMA online magazine) have been pummeling ONE Championship non-stop over their poor financials for months.

A lot of this was, and still is, available on Singapore’s Accounting and Corporate Regulatory Authority (Acra) — a public trove of data detailing everything from shareholders to AGM meetings, constitutions and yearly financials.

Most observers cite firms like ONE to be hit particularly hard because of COVID-19, which is quite natural and very valid, but we still mustn’t forget:

• ONE Championship is an 11-year old unicorn (>$1b valuation) which still doesn’t make money aka it is still loss-making
  In FY2020, ONE generated $48.1 million in revenues. Losses were $47.6 million. Valuation? $1.2 billion.
  

• This was even after ONE Championship financially engineered conducted an inter-party transaction to sell a $400 million entity back to itself

  ONE recorded the gains on the back of a $400 million sale of “intellectual property rights relating to combat sports and martial arts business in the United States” to a Delaware-incorporated subsidiary called One Championship Inc, according to the financials. (DealStreetAsia)

  So they basically created a new entity, “placed” their IP in it, valued it at $400 million and sold it back to themselves. But who decided that the IP was worth $400 million?
  

• ONE’s revenues included barter.
  In plain language, not all of the $48.1 million was hard cash. They included things like logo placements, products, giveaway items as cash made. So how much money is this company actually making at all?

I guess it’s no wonder then that ONE is heading to the Caymans, since it frees them from looking over their shoulder ever so often.

To be fair, ONE has a great product. Their branding is top-notch. (Have you seen their merchandise? Geez.)

I was given the opportunity to attend a ONE event at the Singapore Indoor Stadium over the weekend, and it was nothing short of amazing. The energy, the music, the visuals and display were all super cool. It was even more electric than UFC’s recent Singapore event in June. (And I’m not even into MMA!)

They set up a moshpit all the way upfront to give MMA fans closer access to fighters and ring action. Bloody brilliant. Some of these moshpit fans were standing there since 7am…

But when I asked how much they paid for their tickets, one group told me they were sponsored by a private sports school in Singapore. “40 of us students were sponsored together.” There were about 100 odd people in that moshpit.

I randomly approached another 2-3 people in the circleside seats — all were sponsored also. I didn’t manage to speak to anyone else else in the other category seats. The stadium was pretty packed overall. I would say 70%?

This event was a big deal for ONE. It’s the first time they were beaming their live shows into US primetime via Amazon Prime Video.

How things unfold for ONE will be interesting to watch in coming months.

At the end of the day, I don’t think MMA fans really care how a company is run as long as content keeps flowing. And in that sense, ONE will keep chugging along, as long as investors are willing to invest.

Not everyone will make money. Some in fact, will lose immensely. But there’s always a bigger sucker out there.

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What you need to read regarding 1MDB and Najib’s arrest:

“Najib is sent to jail, finally” — Tom Wright & Bradley Hope, authors of Billion Dollar Whale

“Explainer: Malaysia’s ex-PM Najib and the multi-billion dollar 1MDB scandal” — Reuters

“A brazen kleptocrat has gone to jail in Malaysia. He must stay there” — The Economist

Other interesting reads you shouldn’t miss:

“Pope further tightens controls, centralisation of Vatican finances” — Reuters

“Oxford’s £6bn endowment fund hit by staff exodus” — Financial Times

“End Times in Aspen” — The Atlantic

A reporter’s mid-week tipple:

An Old Fashioned with Rebel Yell Straight Rye Whiskey. And mini pretzels.