Strapped Recruit App Signing Day Sports Throws IPO Hail Mary
Four years ago, Dennis Gile, a former pro football player who founded a successful quarterback training service in Arizona, decided to expand into the congested college sports recruiting industry.
Signing Day Sports (SDS), a paid app to match high school prospects with college coaches, was Gile’s big attempt. “The new era of recruiting is now,” the company proclaimed upon its launch.
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That era may soon extend to Wall Street, as SDS filed paperwork with the Securities and Exchange Commission last week for an initial public offering that would value the business around $100 million.
But while IPOs typically mark a company milestone on a path of strong, secure growth, the SDS filing—which, according to SDS’ SEC prospectus, hopes to raise $22.5 million—appears to be the equivalent of a late-game desperation heave toward the end zone.
According to its filings, SDS’s current and former accountants have “expressed substantial doubt as to 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 film, transcripts and verified vital statistics, and connect with NCAA football, baseball and softball coaches. SDS’s core pitch is that it eliminates travel necessary for kids to get to camps, a traditional way to gain universities’ attention. Though its service is hardly a novel concept—a competitor company, Next College Student Athlete (NCSA), has been doing something similar, albeit at a higher price point, for decades—SDS boldly touted itself as a game-changing technology that would allow athletes to affordably interface with schools.
And by some measures, it seems to have made a splash.
Its current shareholders include Yankees third baseman Josh Donaldson; sprint car driver Spencer Bayston; and former pro basketball player and NBA Players Association executive Roger Mason Jr. (Mason also serves on SDS’ board of directors.) Over the last year, the company has grown from eight to 15 employees, with recent hirings including two veteran Division I offensive coordinators: Jeff Hecklinski, formerly of San Diego State, and Luke Meadows, who most recently coached at Troy.
Earlier this month, SDS announced a data-sharing partnership with Chicago-based Zcruit, a recruiting database service that serves over 100 Division I schools. “I have been really impressed by what they have been able to do,” Zcruit’s director of business development, Cory Nichol, told Sportico. “They have done a great job of putting together a team of people who really understand the space.”
Whatever signs of success, SDS has also seen Gile sued and recently excised from his company—though he remains SDS’ largest shareholder—amid a spate of leadership turmoil. Most of its board of directors and management team have departed or shuffled titles in the past seven months.
Absent from the business, at least lately, is much in the way of money. As it currently stands, SDS does not have cash on hand to pay its bills next year. Over the past two years, the business’ annual revenue has cratered, from $341,000 in 2021 to just $78,336 in 2022. SDS has $7.2 million in long-term debt and would be worth less than nothing if liquidated.
Why then attempt to go to market? Because failure to hold an IPO likely means a death sentence. To finance its activities and obligations, including $1.26 million in 2021 salaries for Gile and five other former executives, the company borrowed millions of dollars it won’t have to repay if it goes public.
Promissory notes that SDS must currently settle in cash can instead be compensated with shares if the company goes public. SDS has a $1.32 million bill due in August, another $6.3 million due in 2024 and just $254,000 in cash on hand.
Underwriter Boustead Securities expects interested investors to pay between $4 and $6 a share at the IPO. Given part of Boustead’s fees are being paid in warrants for shares in the public business, there is incentive for the underwriter to sell the IPO.
Signing Day Sports is one of a number of online recruiting ventures that have tried to make a play for the $29 billion youth sports industry. Some of its competitors—such as Hudl, which counts 6 million active athlete users—provide a free platform for the athletes while targeting high school teams or college athletic departments as their paying clients. SDS takes the reverse approach, charging athletes a membership fee to promote themselves and present verified statistics. It competes against industry giant NCSA, which was founded in 2000, currently employs over 1,000 staffers 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 college athletic departments avail themselves of, it’s debatable how much value there is for certain high school prospects (or their families) to pay out of their own pockets for the recruiting equivalents of dating apps.
However, SDS contends in its SEC filings, the sports recruitment industry continues to see “the best athletes in the world get overlooked,” and its technology can help “bring equal opportunity” to collegiate hopefuls at all levels.
In an interview in March with Sports Business Journal, Gile analogized his service to “LinkedIn on steroids,” citing the success story of his own son Jordan, a top-ranked high school quarterback, who accepted a scholarship to play at Florida. However, earlier this month, Dennis Gile tweeted that after an “unfortunate call,” Jordan would not be going to UF and was reopening his commitment. (Currently pinned to the top of Jordan Gile’s Twitter profile is a link to his highlights on Hudl.)
Dennis Gile declined to comment for this story, citing the SEC-mandated quiet period for IPOs.
A first-team all-star quarterback from Phoenix, Gile ended up as a starter for two years at Central Missouri, had a cup of coffee with the New England Patriots and later played in both the Canadian Football League and Arena Football League. He ultimately made his name training pro and scholastic quarterbacks in his home state. In 2016 a reality TV series built around Gile and his training school, QB Academy, began filming by a now defunct marketing agency, though the show never made it to air.
After launching Signing Day Sports, Gile secured a $700,000 loan in April 2021 from John Dorsey, an Arizona businessman. The parties executed a security agreement in which Gile pledged as collateral his 3% interest in SDS plus any related proceeds. The loan was due to be repaid in full last spring. Later that year, Gile stepped down, and Dorsey became CEO.
In September, after Gile had failed to pay back all but $100,000, Dorsey and his family holding company filed a suit in Maricopa County superior court, accusing Gile of breach of contract. Gile responded with a counterclaim that accused Dorsey of failing to deliver on a promise to facilitate $6 million in startup capital, and deceiving him into relinquishing the CEO’s seat. The parties eventually settled.
Dorsey, who was paid a base salary of $240,000, resigned from the company last June, after which Gile reassumed the role of CEO. He lasted until November, when he resigned and became president of the board.
As part of their settlement agreement, Dorsey agreed to waive his claims against Gile in exchange for an initial payment of $10,000 and a promissory note of $40,000, contingent on Signing Day Sports’ initial offering successfully raising at least $1 million in proceeds before July.
In a text message to Sportico, Dorsey called the recruiting app “phenomenal” and said that his lawsuit against Gile had “nothing to do with SDS.” Dorsey, individually, remains SDS’ second-largest shareholder.
The SEC prospectus filed last week inadvertently listed his cell phone number as the Signing Day Sports’ main corporate number, an error Dorsey said would be remedied in an amended filing. He declined further comment, citing the confidentiality terms of the settlement.
At the end of March, SDS paid $800,000 to Gile as part of an agreement to repurchase 600,000 shares of common stock and which saw Gile resign from his position as president of the company’s board. Dorsey then received $695,000 of that money, to address the remaining balance and interest payments on the loan. Gile and Dorsey have since separately signed covenants not to sue SDS.
Besides the 88% drop in revenue from 2021 to 2022, there are other hints of problems in the first draft of the prospectus. That preliminary form, filed in November, contained a detailed declaration of users—more than 75,000 high school students at 600 schools and 436 college athletic departments—while the current version simply refers to “many.”
That’s not the only source of uncertainty ahead of going public. While its IPO has been filed, Signing Day Sports has yet to set an initial offering date.
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