Photo illustration by Lorenzo Gordon
Four years ago, Dennis Gile, a former professional football player who founded a successful quarterback training service in Arizona, decided to expand into the congested industry of college athletic recruiting.
Signing Day Sports (SDS), a paid app to match high school prospects with college coaches, was Gile’s big attempt. “The new age of recruiting is now,” the company proclaimed when it launched.
That era could soon spread to Wall Street, as SDS filed paperwork with the Securities and Exchange Commission last week for an initial public offering that would value the company at around $100 million.
But while IPOs typically mark a company milestone on the path to strong and secure growth, the filing for SDS — which, according to SDS’s SEC prospectus, hopes to raise $22.5 million — seems like the equivalent of endgame desperation. end zone.
According to its documents, current and former SDS accountants “expressed substantial doubts about the company’s ability to continue as a going concern.”
The subscription service, which charges customers $25/month or $250/year, allows players to upload their movie, transcripts and verified vital stats, and connect with football, baseball and hockey coaches. NCAA softball. The main argument of SDS is that it eliminates the travel required for children to go to the camps, a traditional way of attracting the attention of universities. While its service isn’t a new concept—competing company Next College Student Athlete (NCSA) has been doing something similar, albeit at a higher price, for decades—SDS has boldly marketed itself as a breakthrough technology that would allow athletes to have an affordable interface with schools.
And in some ways it seems to have caused a stir.
Its current shareholders include Yankees third baseman Josh Donaldson; sprint car driver Spencer Bayston; and former professional basketball player and NBA Players Association executive Roger Mason Jr. (Mason also serves on the SDS board of directors.) Over the past year, the company has grown from eight to 15 employees, with recent hires including two veteran Division I offensive coordinators: Jeff Hecklinski, formerly of San Diego State, and Luke Meadows, who recently coached at Troy.
Earlier this month, SDS announced a data-sharing partnership with Chicago-based Zcruit, a recruiting database service that serves more than 100 Division I schools. what they were able to do,” Cory Nichol, director of business development at Zcruit, told Sportico. “They’ve done a great job building a team of people who really understand the space.”
Whatever the signs of success, SDS has also seen Gile sued and recently excised from his company – although he remains SDS’ largest shareholder – amid a wave of management turmoil. Most of its board and management team members have left or changed titles in the past seven months.
Away from the company, at least lately, is a lot of money. As it stands, SDS has no cash to pay its bills next year. Over the past two years, the company’s annual revenue has plummeted from $341,000 in 2021 to just $78,336 in 2022. SDS has $7.2 million in long-term debt and is reportedly worth less than nothing in the event of liquidation.
Why then try to go to the market? Because failing to hold an IPO probably means a death sentence. To fund its operations and obligations, including $1.26 million in 2021 salaries for Gile and five other former executives, the company has borrowed millions of dollars that it won’t have to repay if it goes public.
The promissory notes that SDS currently has to settle in cash can instead be cleared with shares if the company goes public. SDS has a $1.32 million bill due in August, an additional $6.3 million due in 2024 and only $254,000 in cash.
Underwriter Boustead Securities expects interested investors to pay between $4 and $6 per share in the IPO. Since a portion of Boustead’s fees are paid in warrants for shares in the public company, the underwriter has an incentive to sell the IPO.
Signing Day Sports is one of many online recruiting companies that have tried to make a name for themselves in the $29 billion youth sports industry. Some of its competitors, such as Hudl, which has 6 million active sports users, provide a free platform for athletes while targeting high school teams or college athletic departments as paying customers. SDS takes the opposite approach, charging athletes a membership fee to promote themselves and feature verified statistics. It competes with industry giant NCSA, which was founded in 2000, currently employs over 1,000 people and was acquired last year by IMG Academy.
Given the availability of free services like Hudl and the litany of scouting lists and recruiting tools available to college athletic departments, it’s questionable how much value there is for some high school prospects (or their families) to pay out of their own pockets to recruit the dating app equivalents.
However, SDS claims in its filings with the SEC that the sports recruiting industry continues to see “the best athletes in the world being overlooked” and that its technology can help “level the playing field” for college hopefuls at all levels. .
In a March interview with Sports Business Journal, Gile compared his service to “LinkedIn on steroids,” citing the success story of his own son Jordan, a top quarterback, who accepted a scholarship to play in Florida. However, earlier this month, Dennis Gile tweeted that after an “unfortunate call” Jordan would not be going to UF and was reopening his engagement. (Currently pinned to the top of Jordan Gile’s Twitter profile is a link to his Hudl highlights.)
Dennis Gile declined to comment for this story, citing the SEC-mandated blackout period for IPOs.
A star first-team quarterback for Phoenix, Gile was a starter for two years at Central Missouri, had a cup of coffee with the New England Patriots and then played in the Canadian Football League and the League. arena football. He eventually made a name for himself training professional and school quarterbacks in his home country. In 2016, a reality series built around Gile and his training school, QB Academy, began filming by a now-defunct marketing agency, although the show never aired.
After starting Signing Day Sports, Gile secured a $700,000 loan in April 2021 from Arizona businessman John Dorsey. The parties signed a collateral agreement in which Gile pledged its 3% interest in SDS plus any related proceeds. The loan was to be repaid in full last spring. Later that year Gile resigned and Dorsey became CEO.
In September, after Gile failed to repay all but $100,000, Dorsey and his family holding company filed a lawsuit in Maricopa County Superior Court, accusing Gile of breach of contract. Gile responded with a counterclaim accusing Dorsey of breaking his promise to facilitate $6 million in seed capital and tricking him into giving up the CEO seat. The parties eventually came to an agreement.
Dorsey, who received a base salary of $240,000, resigned from the company last June, after which Gile took over the role of CEO. It lasted until November, when he resigned and became chairman of the board.
As part of their settlement agreement, Dorsey agreed to waive its claims against Gile in exchange for an initial payment of $10,000 and a promissory note of $40,000, subject to the initial offer of Signing Day Sports successfully raises at least $1 million in proceeds by July.
In a text message to Sportico, Dorsey called the recruiting app “phenomenal” and said his lawsuit against Gile had “nothing to do with SDS”. Dorsey, individually, remains the second largest shareholder of SDS.
The SEC prospectus filed last week inadvertently listed his cell phone number as Signing Day Sports’ primary business number, an error that Dorsey said would be corrected in an amended filing. He declined to comment further, citing the privacy terms of the settlement.
In late March, SDS paid $800,000 to Gile as part of a deal to repurchase 600,000 common shares and which saw Gile resign as chairman of the company’s board. Dorsey then received $695,000 of that money, to settle the remaining balance and interest payments on the loan. Gile and Dorsey have since separately signed undertakings not to sue SDS.
Besides the 88% drop in revenue from 2021 to 2022, there are other hints of trouble in the first draft of the prospectus. This preliminary form, filed in November, contained a detailed statement from users – more than 75,000 high school students in 600 schools and 436 university athletic departments – while the current version simply refers to “many”.
This is not the only source of uncertainty before going public. While its IPO has been filed, Signing Day Sports has yet to set an initial offering date.
