[Updated] ONE Championship generated $341m profit in FY2020 from asset sale to subsidiary

Chatri Sityodtong, founder and chairman of ONE Championship

Editor’s Note: This article has been updated to include additional information and independent verification of ONE’s financials. The updated version also adds that the resignation of two Temasek-linked directors from One Championship earlier in the year were related to its listing plans. 

An asset sale to a subsidiary helped sports media firm ONE Championship report a $341 million profit in the financial year ended December 31, 2020, according to financial documents seen by DealStreetAsia.

The development was first reported by mixed martial arts (MMA) publication Bloody Elbow.

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.

The inter-company transaction was an equal mix of cash and stock. The cash portion was unpaid as of December 31, 2020.

This appears to have saved the mixed martial arts promoter from reporting out another loss-making fiscal year. ONE would have reported a loss of $59 million in the absence of the $400 million deal.

One industry source told DealStreetAsia that no financial engineering was involved, explaining instead that this was a matter of technical accounting applicable to IP-based businesses when they create entities in the US.

While ONE had raised $346 million from investors as of Jan 1, 2021, it also racked up $273 million in losses, suggesting that its current operations are mostly run on $72 million worth of convertible notes raised last year.

Out of these convertibles, S$14 million were financed by Mission Holdings founder and ONE director and investor Saurabh Kumar Mittal at an interest rate of 15% per year. The remaining convertibles are understood to be backed by Temasek Holdings, but this could not be independently verified.

The $341 million profit was recorded at the company level. The ONE Championship group, which comprises subsidiaries such as ONE Esports, ONE Warriors and ONE Studios, still recorded an overall loss of $47.6 million for the fiscal year 2020.

Is ONE shifting jurisdiction to Cayman?

ONE’s latest financials were recorded in US dollars versus Singapore dollars previously. The company has also not filed its FY2020 financials with Singapore’s Accounting and Corporate Regulatory Authority (ACRA) as it used to in previous years.

DealStreetAsia understands that ONE will be updating its FY2020 financials on ACRA in the coming weeks.

ONE set up a Cayman Islands-listed entity called Group One Holdings on Aug 6, 2021, which suggests that the Singapore-headquartered firm may choose to re-domicile to the tax haven, which offers a more opaque structure compared to Singapore.

A source aware of the developments explained that the Cayman entity was set up for “capital markets reasons” as ONE continues to evolve into a global business.

The source added that a US entity was also set up to support a ramp-up in its US operations. ONE’s decision to appoint ex-Turner president David Levy as board director was also said to be part of that push.

In an unrelated move, earlier this year, Temasek managing director Fock Wai Hoong and Heliconia Capital chief executive Derek Lau had departed ONE’s board. Both Temasek and Heliconia are long-time backers of the sports media property.

Group ONE Holding’s Group President, Hua Fung Teh told DealStreetAsia via email at the time: “As part of our plans for a public listing, we are taking a number of technical steps to ensure that we have the right governance structure in place for various jurisdictions including the US. Temasek and Heliconia Capital remain fully engaged and supportive with our strategic direction.”

ONE, meanwhile, had said the changes were made for the company to have the “right governance structure in place” as it prepares itself for an eventual public listing.

The firm added that it has appointed Goldman Sachs and Credit Suisse as its financial advisors and Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisor.

An August 5 ACRA filing also showed that ONE’s senior vice president of finance, Wei Jin Soh, was replaced with chief financial officer Jesley Chua. One industry source told DealStreetAsia that Soh left the firm because he was reluctant to sign off the paperwork on ONE’s latest financials.

Soh has rejected this as untrue, but declined to comment on the reasons for his departure.

Earlier this year, ONE was reported to be exploring a special purpose acquisition company (SPAC) merger to raise cash, according to Bloomberg.

DealStreetAsia understands that ONE’s SPAC conversations have made little movement since then, with its chairman and CEO Chatri Sityodtong making trips to the Middle East to raise funds from private investors instead.

ONE denies media reports

ONE Championship has so far rejected assertions that its business is in trouble.

In an interview with Ariel Helwani on the online telecast of The Mixed Martial Arts Hour on Wednesday, ONE’s group CEO and chairman Chatri Sityodtong cited “a ton of factual errors” referring to reports on ONE’s financials but declined to clarify what these inaccuracies were.

“The internet is a dangerous place and you shouldn’t believe everything you read. There are a lot of factual errors and inaccuracies,” said Sityodtong in the interview.

DealStreetAsia has reached out to ONE for comment.

ONE Championship is backed by investors including Sequoia Capital, GIC, Heliconia Capital, Mission Holdings and others. The firm was at one point touted to be one of Singapore’s top emerging unicorns.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.