GAN needs a new leadership

May 24. 2022

Gan shareholders

There are only a couple of weeks until the next Annual meeting at GAN Ltd, and I want to share my GAN experience with you. But first a few words about myself:

I have 35 years in the Gaming industry, even started there before internet was around. I had a big part of building successful companies like Kesak, Centrebet and Playit, and also worked three years for Norwegian State monopoly (Norsk Tipping) to help them build their sports betting. In 2002 I wanted to start my own business and founded NordicBet (Big operator in Nordic countries) and Triobet (Market leaders in Baltic country). This company was sold to Betsson in 2012. In 2014 I founded Coolbet, and we went online in May 2016. I’m also included in the industry’s Hall of Fame. As you can see, I have a long history in, and can speak with authority on the business aspects of, the gaming industry.

In September 2020 GAN contacted Coolbet and told us they wanted to buy Coolbet. The deal was signed in November but effective as of January 1, 2021. While I had many reservations about GAN buying Coolbet, I wanted to respect my management team and the other Board members of Coolbet and all the shareholders that made it possible for me to build Coolbet. Before we executed the Merger Agreement, I had a call with Dermot Smurfit about my future at GAN and Coolbet, post-closing, and asked about their plans for me as I was not ready to retire. I was told that a seat at the Board would be a natural fit for me at GAN. However, they did not appoint me to the Board and in fact told me that a seat at the Board was nothing I wanted to have. In addition, GAN did not make me an offer of employment, however, after I started to push a bit, I was offered a role as a Global director of sports betting. The only problem with that was that our sportsbook manager in Coolbet, Endre Nesset, was planning to assume that role in the beginning of the summer, he just needed some time to finish some re-structuring at our sportsbook in Coolbet. But Dermot Smurfit said it was something I could do temporarily, while giving Dermot the time to find my role at GAN. In May 2021 Endre Nesset was becoming ready to step into his role as Director of sports betting and I inquired about what my new role would be. After some weeks I was offered a role as an office manager in an office we planned to open in Spain. I took that as an insult to be honest and resigned from GAN immediately. The chairman called me and told me he was disappointed in me; I told him to take a look in the mirror. Effective January 1, 2022, my non-compete period expired.

It was not a big problem for me to leave GAN, it has given me an opportunity to pursue many of the great plans I have and build a new company. But I did feel cheated, because it seemed obvious that Dermot Smurfit never wanted to have me around. But my problem now is that I currently hold 840,000 shares at GAN, and know personally that the leadership team at GAN is non-effective and the Board is weak. Below are some of the more reasons for my views:

·        Typically, when you buy a good company like Coolbet, one of the most important things is to secure key management people and ensure that the momentum is kept alive. Instead, Dermot Smurfit pushed out me--the founder and the guy who developed the concept and who hired and trained most of the young and brilliant management we have. I’m the father of Coolbet’s CFO and have been mentor for the CEO of Coolbet for 20 Years. How do the current young management team feel about this? And how about next level of the business---who will make sure GAN comes up with the innovative solutions that will make GAN a winner?

·        When I was told to “wait and see” about a potential position in GAN I took time to investigate GAN, including talking with many employees. I also studied the organizational structure of GAN, and believe it is not an effective structure. Especially when it comes to the IT-team. I know that the new CTO (Jan Roos from Coolbet) has done a good job of trying to clean up the ineffective mess that was inherited at GAN.

·        I had many questions regarding some very well-paid people at GAN—people who were not motivated or qualified for their jobs. Most of them are gone now, which should have a positive impact on GAN. 

·        The group of leaders in GAN are spread all over the place. They simply don’t have an office where they meet every day and work together to make decisions together and work like a team. It’s a horrible solution and a bad way to run a big company.

·        Last Year Dermot Smurfit made an agreement with two Casino companies for so called exclusive content. I thought the deal was very poor for GAN, so did also our very experienced Casino manager, and we both been dealing with online casinos for a very long time, I signed my first casino deal in 2003. I really don’t know how it’s been going, but I can’t imagine it’s been good for GAN, maybe someone should ask Dermot Smurfit about the status?

·        One of the most disappointing issues is the amount of the salaries and bonuses the leaders and the board have been paying themselves. 2021 was a horrible Year for GAN; GAN did not deliver on the bottom line and the share price dropped significantly. Regardless, the leadership team gave themselves huge bonuses. Why? Aren’t bonuses something you should pay out when you produce positive results? In my companies we never paid any bonuses before the company was profitable, and then bonuses were linked up with monthly salaries to every employee in the company, not only for the greedy leaders and Board members. Just to compare, when I served as the CEO for 4 years and Executive Chairman for 2 years, my average gross monthly salary was $ 6500 per month. Every employee always understood that bonuses would only be paid out after turning profitable and then bonuses were paid out to every employee at GAN. In fact, due to the outstanding financial results that Coolbet, as a stand-alone subsidiary, had in 2021, every Coolbet employee received two months extra salary as a bonus.

·        And the share option program seemed to be a disaster. Almost all the share options given out were for top management and the Board. In the share option program for Coolbet 17% was given to management and the Board, while the rest were allocated to other employees. Maybe 50/50 would be ok just to fit into “the American way”. Just must mention that there was given out around 1.5 million share options in February 2021, indeed only to the people at the top. I was already a director by then but got zero share options. When I asked Dermot Smurfit why they did not grant any share options to me and he responded that the share options were only for those employees who worked at GAN before October 2018. Unfortunately, that was not a true statement because other employees who began working at GAN after October 2018 also received options.

·        There are approximately 260 developers at GAN and in January 2022, after my non-compete and non-solicitation expired, I offered 10 developers at Coolbet a job for my new project. And I did tell them in a call that they could join after they completed any outstanding projects for GAN. It was not critical when they started, and I was making an extra effort not to hurt GAN. All the guys were motivated to cooperate with GAN to finish their projects. But when Dermot Smurfit heard about this, he offered to pay $ 2 million plus to ensure that these guys committed for another year. It was not a problem for me if the developers continued another year with GAN, but the problem was that Dermot Smurfit never asked me what was going on, or he did not ask somebody else to call me. And for sure the developers would not say anything as they did not want to jeopardize their huge bonus. And how would the other developers feel about the bonus payment to the other employees as the other developers did not receive this same offer. This is a typical example of poor communication and leadership and throwing large sums of money around.

·        I don’t think the Board is very professional at GAN. From what I heard the Chairman is an old friend of the Smurfit family. Dermot Smurfit’s uncle also serves on the Board. In addition, the CFO of GAN, Karen Flores, serves on the Board. In my opinion, one of the responsibilities of the Board is to look after GAN’s money; it does not seem wise to have the CFO serve on the Board. My general impression is that the Board is weak and more like a “yes Dermot” Board.

The world of finances is undergoing a lot of turbulence, and as a result, it will be difficult to bring in money for non-profitable company any time soon. Especially for companies that not showing progress. Companies in our industry have been hammered on Nasdaq last Year, and there are many reasons for that:

·        Many of the big players been throwing out billions of dollars in bonuses for punters, to win market share in newly regulated states. It seems like an ineffective strategy and will likely not pay off in the long run. And worst of all, bonuses for online gaming are the worst driver that exist for gaming addiction. In Europe gaming companies learned that this is a bad strategy and now bonuses are banned in many regulated markets. I’m sure the states will learn their lessons on bonuses soon. Anyway, it’s a very expensive way to win market share and it will likely destroy the bottom line.

·        Not so many states are regulated for online casinos yet, which is where the big money is. But sports betting is very important to win the trust of the customers.

·        Our industry is relatively new to the US market and, as a result, US investors don’t understand enough of the potential yet.

As you are aware, the valuation of GAN is insanely low. If you separated Coolbet from GAN, the value of Coolbet on its own would twice as much as GAN now. Coolbet is performing financially well in most markets, particularly in South America. Clever developers are building the new GAN sports, which is the B2B version of the Coolbet software. That will be very good stuff and I’m confident it will be the best of its kind in the market. That will help GAN to take new steps in the B2B markets. But using so many resources from Coolbet to clean up the GAN B2B mess also comes with a price for B2C, the growth of Coolbet is slowing down a lot, and that may not be so smart when Coolbet is the only part of GAN that is making the money. But in the long run I don’t think B2B business will be massive, when the consolidation continues in the market the big players will want to have their own software. That’s why GAN should be a very hot candidate for acquisition, because there is not much effective software and knowledge out there to buy. 

I’m writing this with a hope that it can start a process, a process that leads to a new board and a new CEO of GAN. It’s a company with great potential because of what Coolbet brings to the table. We need a leader who can collect the troops and who respect all the employees of the company. Someone who can keep up the quality and be more vigilant about spending money.

I’m not exactly certain of the process to make things happen in the US public markets. But maybe someone who reads this and cares about their GAN shares can start a process to change things. But my feeling is that this needs to happen in US, the big part of shareholders are US investors, and many of them institutional investors. By publicizing this on forums where GAN is discussed I hope someone will take action and initiate some process. And if nothing happens, I know I did what I could, and life goes on.

I must be very clear that this is posted only from me as a worried shareholder. I don’t have any ambition or intention to have a management or director role in GAN.

My email address for this case is: ganfix2022@gmail.com

Best Regards,

Jan A. Svendsen