Hall of Fame Village (HOFV): Not the Disney World Of Football, Merely a Midwestern Mirage
HOFV is attempting to build the “Disney World of Football” in Canton, Ohio next door to the Pro Football Hall of Fame, a project which will be highlighted by an indoor NFL-themed waterpark.
HOFV fell 90% in 2020 post-SPAC due to a series of extremely dilutive secondaries and because it proved hard to get investors excited about the prospects of an indoor waterpark in Canton, Ohio.
Since then, shares have risen 160% this year as the company touted an NFT, as well as the news that HOFV is being added to the Russell 2000. This has created retail, passive, and uneconomic buying.
HOFV tried an NFT Hail Mary in March, announcing a partnership with Dolphin Entertainment (DLPN) to release NFTs, which sent HOFV shares up 200% that day. Dolphin Entertainment had never released an NFT, but they were, notably, the PR firm for the fraudulent Fyre Festival.
The NFT offering was an unmitigated disaster; their “1-of-1” NFT meant to be the crown jewel of the collection failed to meet its reserve price. Of the other 100 NFTs released, only one sold.
HOFV’s largest shareholder is Stuart Lichter, who was also heavily involved with Elio Motors (OTC: ELIO). We see alarming parallels between HOFV and ELIO, which has declined 98% since IPO amidst claims that their three-wheeled fuel-efficient car was vaporware and unable to secure funding to enter production.
HOFV’s investments in physical assets have gone just as poorly as their investments in virtual ones. HOFV’s Phase I build cost the company $250M yet generated a meager $1.8M in revenue between 2019 and 2020 (despite hosting 73 events in 2019).
HOFV has issued guidance calling for revenue growth from $7 million in 2020 to $167 million by 2026. We believe HOFV’s 2026 guidance seems almost impossibly unrealistic, and perhaps the worst of any 2020 SPAC.
HOFV’s guidance track record has been a resounding failure. HOFV missed 2019 guidance by 53% and 2020 guidance by 82%. Long-term guidance appears set to miss by a similar amount.
To achieve its Waterpark guidance, every traveler that landed in the Akron-Canton Airport from 2017 to 2019 will have to attend the Waterpark. More realistically, we estimate, if built, the Waterpark will miss guidance by 85%.
HOFV currently lacks the funding to build the Village. When it needed to raise $25M late last year, the stock fell 60% amidst massive dilution. It is now seeking a $200M private construction loan to build the rest of the Village.
HOFV’s current largest source of revenue will quickly turn into a massive drain on the project. HOFV’s naming sponsor is Johnson Controls, yet HOFV will owe them up to $217M to serve as the general contractor for Phase II/III assets.
Introduction
The Hall of Fame Resort and Entertainment Company (HOFV) is building the “Disney World of Football” on land surrounding the Pro Football Hall of Fame (“PFHOF”) in Canton, Ohio. After failing to raise enough money by going public through a SPAC last year, HOFV is currently seeking a $200 million private construction loan needed to build out Phase II of the project which will cost $300 million.
Phase I of the project involved the building of the Tom Benson Hall of Fame Stadium and youth sports fields. Phase II calls for an indoor NFL-themed waterpark, two hotels, and other retail assets. In addition to building physical assets, HOFV also has media and gaming verticals.
Construction of Phase I was finished in 2017, costing $250 million. Phase I assets generated a paltry $1.8 million of revenue between 2019 and 2020. Despite hosting 73 events in 2019, HOFV generated just $76,000 from these events.
Initially believing they would be able to raise $125 million by going public with a SPAC in August 2019, redemptions and delays caused capital in the SPAC’s trust account to fall to $32 million by the time HOFV finally went public in July 2020. Left thinly capitalized, shares would plunge 90% post-SPAC amidst substantial dilution from secondaries.
This year, with its stock languishing, HOFV turned to NFTs in an attempt to capitalize on the hype surrounding the digital trading cards. HOFV announced a partnership with Dolphin Entertainment (DLPN), previously a $20 million market cap advertising company. Dolphin Entertainment had experience promoting things that didn’t exist, having served as the PR firm for the Fyre Festival, the botched beach bash that sent founder Billy McFarland to prison for six years on fraud charges. What it did not have was experience marketing or selling NFTs. HOFV’s first NFT offering has come and gone, and it was a resounding failure.
We believe HOFV will mirror the outcome of Elio Motors (OTC: ELIO), which has fallen 98% since IPO, unable to secure enough capital to build their long-promised three-wheeled trike. With HOFV currently seeking a $200 million private construction loan, we see a similar outcome. HOFV’s largest shareholder and the driver of the project is Stuart Lichter, who was also heavily involved in Elio Motors. The parallels are uncanny. ELIO has fallen 98% amid calls for an investigation by the local officials.
Currently seeking a $200 million private construction loan, HOFV is claiming that by 2026 they will generate $167 million in revenue, led by an indoor NFL-themed waterpark. When HOFV needed to raise $25 million last year, it was forced to dilute shareholders by 63%, making us wonder about the terms on a private construction loan of $200 million. We believe if the project can even be built, its key asset will miss guidance by 85%.
HOFV’s history is one of delays, missed timelines, and unpaid contractors
HOFV is the result of a 2015 partnership between Stuart Lichter’s IRG and the PFHOF. Initially, the project was supposed to be completed by May 2018.
What the first-ever sports and entertainment smart city was supposed to look like
Source: Johnson Controls, 2016
Source: Cleveland.com Article
But instead of being completed by 2018, contractors for some of the Phase I build were filing liens against HOFV for unpaid work at that time.
HOFV invested $250 million in Phase I, fully completing the initial build by 2017. This initial $250 million of investments resulted in a mere $1.6 million of revenue between 2019 and 2020.
Source: SEC Filings
After the initial work was completed, the project would “sputter” as HOFV was unable to find funding. Michael Klein, who was hired in April 2018 to find a funding, noted that he had pitched the idea to Saudi Arabian investors, who seemed to have no interest. Instead they turned to a SPAC, announcing in August 2019 their intent to go public through a merger with Gordon Pointe Acquisition Corp (GPAQ).
The deal was supposed to close in December 2019, but like the Village, it was plagued by delays. With the deal still unconsummated in February 2020, Covid-19 would throw another wrench into their plans. Whether due to financial turmoil or not liking the deal, GPAQ investors would redeem massively from the SPAC. Initially expecting to receive $125 million from the merger, HOFV wound up receiving only $32 million.
This left HOFV public but thinly capitalized. It was forced to do a series of highly dilutive secondaries, causing HOFV’s stock to plummet. Not helping matters was the issue of an indoor waterpark being the highlight of the project during a time when all indoor entertainment was canceled. Amidst the dilution and plunging stock price, Michael Klein resigned from the Board. The day before HOFV’s merger in July 2020, shares closed at $12 per share. By the end of 2020 shares had plummeted 90% to $1.25. We believe this made HOFV the worst-performing SPAC of 2020, a year when it seemed like almost every SPAC went up.
How HOFV could wind up mirroring the outcome of Elio Motors, another Stuart Lichter related company, that has declined 98% since their IPO
Elio Motors (OTC:ELIO) was the first crowdfunded company to go public in 2016, which was four years after they were supposed to deliver their first three-wheeled trike. But delays and an inability to raise the amount of capital required to actually enter production hampered the company.
The Reg A+ IPO was supposed to help the company raise a portion of the $300 million Elio needed to enter production. It raised $20 million in the IPO, but was never able to raise enough to actually enter production. The trike was supposed to enter production in 15 months according to the company. Elio marketed the trike heavily encourage people to pre-order a trike – 40,000 people would sign up. Yet delays and an inability to deliver a trike plagued the company.
In September 2018, apparently out of other options, Elio launched their own initial coin offering, mirroring HOFV’s Hail Mary NFT. At that time, Elio was a “troubled” company and was turning to the ICO to raise its next round of funding, hoping to eventually raise enough capital to begin production of its long-promised electric trike.
Lichter was heavily involved with Elio. He was a “Director and significant stockholder.” He owned the former General Motors plant in Louisiana that Elio was supposed to use to enter production. But delays, an inability to raise the required capital, and missed deadlines caused people to wonder if the product was vaporware.
The initial coin offering, much like the NFT, was a Hail Mary attempt to get the capital required to enter production. But it was a resounding failure. No capital was raised in the ICO, and ELIO shares have fallen 98% since the IPO, never being able to raise the capital required to enter production and never having built a trike.
Much like HOFV, when Elio Motors went public it needed to raise significant amounts of capital ($200 million) to raise even post IPO to begin production of the vehicle. Unlike HOFV, Elio Motors had no revenue. HOFV merely has minimal revenue.
ELIO Stock Price: IPO-Today
HOFV tries an NFT Hail Mary – We throw a flag on the play
With their stock price languishing, and a burgeoning bubble happening in NFTs, HOFV decided to enter the fray. On March 23 HOFV shares would rise 200% when they announced a partnership with Dolphin Entertainment (DLPN) to produce NFTs.
We note the similarities between HOFV and ELIO here, taking advantage of a crypto-related bubble. ELIO needed a large amount of capital to enter production, tried their ICO, and it failed miserably.
HOFV’s strategy would revolve around its “Heisman 2 Hall” program, meaning that NFTs released as part of this partnership would be of players that had won both a Heisman and been elected to the Hall of Fame. The most popular NFTs have been of current players, but HOFV’s strategy forces it to release NFTs players that hadn’t played in the league for ages. Only one player that has won both the Heisman and been elected to the PFHOF played this century. If that seems like a good idea then perhaps you also think that an indoor waterpark in Canton, Ohio is a good idea.
Since HOFV did not have any experience with NFTs, they needed a partner. And their choice of partner seems telling. They partnered with Dolphin Entertainment (DLPN), a publicly traded previously $20 million market cap company that also had no experience releasing NFTs. But what Dolphin lacked in NFT experience it made up for with experience promoting things that didn’t exist. Dolphin subsidiary 42West was the PR firm for the Fyre Festival.
Source: Fyre Festival Investment Deck
We don’t have to speculate about how bad of an idea partnering with the PR firm for the Fyre Festival to release NFTs of old players is, though, the NFT offering has come and gone and it was a resounding failure.
HOFV’s NFT launch came on May 17 with the release of a special “1-of-1” NFT of Tim Brown, a Heisman winning and Hall of Fame inductee who last played in 2004. The offering also included 100 other NFTs meant for the masses.
We consider the offering an unmitigated disaster.
HOFV’s crown jewel “1-of-1” NFT failed to meet its reserve price, generating minimal bidding activity.
Of the remaining 100 NFTs, only one sold, selling for about $1,200 USD at the time. Only 10 NFTs actually got bids. We believe this is indicative of a failed NFT offering.
The Lone HOFV NFT to Sell
HOFV’s “crown jewel” NFT failed to meet its reserve price, and only 1 of the other 100 NFTs sold. That one sold for .44 ETH, currently worth about $850. HOFV’s NFT Hail Mary fell well short, which is perhaps expected when your partner was the PR firm for the Fyre Festival.
HOFV’s Midwestern Mirage: How an indoor waterpark is supposed to drive revenue from $7 to $167 million in revenue by 2026
“The main risk with a SPAC versus a traditional IPO is the baseline revenue numbers that are used to value the company. In a traditional IPO, a company cannot use forward guidance (projections) to justify its valuation. The SPAC route allows a company to show projected revenue numbers and get valued off of future earnings.” – Mike Murphy, Rosecliff Ventures CEO, as told to Business Insider.
We believe that HOFV has taken advantage of the dynamic described by Mr. Murphy which allows SPACs massive leeway in issuing guidance. We think HOFV’s guidance of $167 million of revenue by 2026 to be the most impossible to achieve guidance of any revenue-producing SPAC. That this guidance will be driven by the construction of an indoor waterpark only adds to the lunacy of the story. We estimate, using HOFV’s own visitor projections, that this waterpark (if even built) will miss guidance by 85%.
Between August 2019 and July 2020, HOFV issued different guidance three times. HOFV’s initial guidance was presented in August 2019, with the year two-thirds of the way through, HOFV guided for $16.7 million of revenue in 2019 and $40.3 million in 2020. Actual revenues would come in at $7.8 and $7.1 million, respectively.
It is noteworthy that as the SPAC saw delays and redemptions, HOFV’s guidance got increasingly aggressive
HOFV’s Ever-Changing Guidance
Source: HOFV Investor Presentations ( August 2019, May 2020, August 2020)
HOFV’s Final Guidance
Source: August 2020 Investor Presentation
Looking much different than initially planned, this is how HOFV projects getting to $167 million by 2026.
Source: August 2020 Investor Presentation
Let’s assess how plausible it is that the waterpark can do $36.7 million of revenue in 2026.
The PFHOF charges $28 per paying adult. Seniors and children pay a little bit less, so we estimate that the average revenue per visitor is about $25 for the PFHOF. We believe this is a good estimate of what HOFV could charge for the waterpark, since that is an established price for a day of entertainment in Canton, Ohio.
The PFHOF gets about 200,000 visitors per year, a number that has been in long-term decline. If HOFV was able to convert every single PFHOF visitor AND get them to pay the same amount for entry into an indoor waterpark, the waterpark would generate $6.25 million of revenue, missing HOFV’s guidance by 83%.
In HOFV’s August 2020 investor presentation HOFV claimed they will be able to attract 360,000 visitors to the Village through Youth Sports alone. If HOFV can hit that target AND convert every single youth sports participant to a paying waterpark customer, it would generate $9 million in revenue, missing their own projections by 75%.
There is simply not enough visitor traffic to the Canton, Ohio area or the PFHOF to allow for an indoor waterpark to generate $37 million in revenue by 2026.
To get a sense of just how absurd their guidance is and how much visitor traffic would have to expand to reach it, we can look to the visitor traffic of the nearby Akron-Canton Airport, which serves Stark County, the home of the project.
Source: Akron-Canton Airport Newsroom
To hit their Waterpark guidance, HOFV would have to capture every single person that flew into the Akron-Canton Airport from January 2017 to December 2019, get them to get off the plane, and then go to an indoor waterpark, and do all of that in one year.
Without a massive change in visitor traffic, the project seems doomed. HOFV has seemingly begun to downplay the Waterpark. It was only mentioned once in their first-quarter conference call, “waterpark” appears only once in the presentation accompanying their first-quarter earnings, and also only appeared once in their 10-Q for the first quarter of 2021.
The rest of Phase II includes a pair of hotels, a Center for Performance, Fantasy Football, and the other assets listed above. HOFV broke ground on Phase II buildout, although it has not publicly disclosed which assets are being built first.
So far, the only Phase II asset that has come online is the downtown DoubleTree Hotel which HOFV purchased for $3.8 million in 2019. HOFV spent $22 million renovating the hotel, which opened in November 2020. The DoubleTree is projected to do $10.8 million in revenue by 2026. Since opening in November 2020, the hotel has generated $558,521 in revenue through the end of Q1, compared to $1.1 million in operating expenses.
If you build it, they will come (they probably won’t), but you do need the capital to build it first
With an estimated cost to build of $300 million, HOFV currently does not have the capital required to build out Phase II assets. Between the SPAC transaction and the following secondaries, HOFV has raised about $100 million, yet only has $51 million in cash on their balance sheet. The remainder of the project is expected to be financed through a private construction loan.
From Maxim Group, the lone sell-side firm covering HOFV, and bookrunner on their secondaries:
“Of the three legs of HOFV’s strategy (themed destination assets, media, and gaming) the former is dependent on a construction loan… which management expects to finalize in 2Q21… the most recent raises have helped underpin, and further the prospects of obtaining a construction loan of more than $200M that HOFV is seeking and expects to finalize in 2Q21.”
Given that HOFV was forced to dilute shareholders by 63% just to raise $25 million to pay off a bridge loan, we struggle to see how HOFV will be able to raise $200 million privately. HOFV’s existing debt is very high interest rate and is much smaller in size than the $200 million they are seeking to raise.
Source: HOFV SEC filings
We question how many private lenders will be willing to lend $200 million to a company that saw the first $250 million of investments finished in 2017 generate $1.8 million in revenue between 2019 and 2020. HOFV hosted 73 events in 2019, so it’s not like this is a reopening play that was just hurt by Covid-19. This is an asset that has been firmly in place, yet generated just $76,000 from events in 2019.
HOFV’s parasitic relationship with their naming sponsor, how HOFV could wind up owing Johnson Controls (JCI) $217 million for the construction of Phase II
Up to $217 million of the $300 million HOFV projects the Phase II build to cost could wind up flowing into the pockets of HOFV’s own naming sponsor. In one of the strangest sponsorship agreements we have evaluated, HOFV agreed to make Johnson Controls their general contractor for Phase II and III assets.
In the early days of the project was highlighted as a key driver of the Village. A 2017 New York Times article noted:
“Last year, Mr. Baker and his staff persuaded Johnson Controls, the international industrial technology company, to pay more than $100 million for naming rights. With the Johnson Controls Hall of Fame Village, the Hall of Fame’s campus will double to 200 acres and include a number of features that are consistent with other sports-focused mixed-use projects.”
Johnson Controls is the current largest source of revenue for HOFV. Between 2019 and 2020, sponsorship revenue accounted for 85% of HOFV’s revenue, Johnson Controls was the largest source of such sponsorship revenue, representing 75% of HOFV sponsorship revenue.
Initially negotiated in 2016, the sponsorship agreement was for $135 million to be paid to HOFV over 18 years, however, it was negotiated down to $99 million over 18 years on the day HOFV went public.
As part of the agreement, HOFV entered into a “Technology as a Service” agreement with Johnson Controls. This agreement made Johnson Controls the general contractor for the construction of Phase II and Phase III assets.
WHEREAS, the Parties desire to enter into a Technology as a Service Agreement contemporaneously with this Agreement, for a term co-terminus with this Agreement, pursuant to which the Company will provide to HOFV or HOFV’s general contractor for the benefit of HOFV (i) certain equipment design consulting, equipment sales, and equipment installations for the Village, (ii) certain operations and maintenance services at the Village, and (iii) certain equipment repair and replacement services at the Village, all as more particularly set forth in the Technology as a Service Agreement.
In the Technology as a Service Agreement, HOFV discloses that they could owe Johnson Controls up to $217 million for these general contracting services.
“Under the terms of the TAAS Agreement, Newco (HOFV) has agreed to pay JCI up to an aggregate of $217,934,637 for services rendered by JCI over the term of the TAAS Agreement.”
Even if HOFV can secure this $200 million construction loan, the entirety of it could wind up in Johnson Controls’ pocket.
After the failed NFT offering, the narrative has pivoted to speculation of promise from an Ohio Gaming Bill. HOFV is poorly positioned to take advantage of this. Their only current gaming offering is a betting-oriented fantasy football league they purchased for $100 and 100,000 shares
As the NFT offering has gotten under sluggish way, retail investors have seemingly sensed it was time to change the narrative to sports betting and fantasy sports. The. Ohio sports bill is making “slow progress” according to local news reports which would create an online and retail wagering market. The bill would allow 11 casino and horse track casinos to apply for an online license and allow them to run a sportsbook.
So far HOFV’s only gaming angle comes from the Hall of Fantasy League. HOFV acquired the assets of The Crown, a failed fantasy football league for $100 (100 dollars) and 100,000 shares from an entity Michael Klein controls last year. HOFV rebranded the league and breathlessly promote it as “revolutionizing fantasy football” unveiling the concept on March 31.
The concept is to create ten regional fantasy football teams that are controlled by a fantasy football expert. Fans can then take stakes in the teams and then win money if the team wins. But there are few signs of initial traction, and while it is still early, there does not seem to be much excitement surrounding the launch.
The Ohio Gaming Bill will likely not help HOFV much, if at all. While current speculation is that the Bill will pass by the end of June, HOFV is not in a position to capitalize.
Bleecker Street Research is short shares of HOFV. We believe shares could wind up worthless and have questions as to the likelihood of the project ever being built. Should the construction loan be secured, HOFV could pay up to $217 million to their own naming sponsor for construction of Phase II assets, and should that work, we view the guidance HOFV believes they can achieve to be an economic impossibility.
We believe HOFV has told investors a ridiculous story. The notion of a $600 million investment in an entertainment village in Canton, Ohio is silly, and we believe the project is more like a Potemkin village. HOFV’s guidance seems almost entirely detached from any sense of economic reality. Discussing how impossibly unrealistic their guidance is an exercise that requires faith that the assets can even be built, something HOFV currently does not have the funding to do. When HOFV needed to raise $25 million in November 2020, shares plunged 53% . We struggle to imagine how onerous the terms on a private $200 million loan would be if that’s what it took to raise $25 million.
HOFV’s NFT strategy was clearly a Hail Mary – and it didn’t work. We believe shares could wind up worthless, crushed by dilution, minimal revenue generation, and massive losses.