How a seller-financed esports team sale works, and where it breaks

Esports organizations change hands, and the buyer does not always arrive with the full price in the bank. One answer is seller financing: the seller accepts a small payment at closing and lends the buyer the rest, to be repaid over a fixed period. The deal gets done, the seller books a sale at the price it wanted, and the buyer takes control of the team before paying for most of it.

The arrangement moves risk from one side to the other. Until the loan is repaid, the seller has sold its team but still depends on the buyer's success to be paid. When the buyer struggles, the seller is left holding a debt, a set of rights over the buyer's assets and a hole in its accounts.

A public example in esports is the sale of Complexity by GameSquare Holdings to a group led by the organization's founder, Jason Lake, in March 2024. Because GameSquare is listed, the purchase agreement, the promissory note and the security agreement were all filed with the United States Securities and Exchange Commission. This guide follows those documents step by step: what changes hands at closing, how the price is set and adjusted, what the note says, what the security covers, what counts as a default, and what the seller's own accounts show when repayment becomes doubtful.

Purchase agreement and promissory note filed by GameSquare Holdings as exhibits to its report on the sale of Complexity, March 2024.

The seller becomes the lender

In an ordinary sale, the buyer pays the price at closing, often with money borrowed from a bank or raised from investors. In a seller-financed sale, part of that borrowing comes from the seller itself. The buyer signs a promissory note, a written promise to pay a set sum by a set date, and hands it to the seller in place of cash.

GameSquare's press release of March 1, 2024 described the Complexity deal in those terms. Global Esports Properties, an investor group led by Lake, the founder and chief executive of Complexity, agreed to buy the organization for about US$10.36 million. It would pay US$0.75 million at closing, and the remaining balance took the form of a three-year seller-financed note of about US$9.61 million.

The seller had its own reasons to sell. GameSquare then had a pending acquisition of FaZe Holdings, and its chief executive, Justin Kenna, said in the release that the deal suited all parties, the leagues where Complexity and FaZe competed included, as many leagues have rules around the ownership of multiple teams. The release presented the sale as part of the company's asset optimization strategy.

The structure meant GameSquare received under 8% of the price in cash on day one. The rest depended on the note.

What changes hands at closing

A team can be sold as a set of assets or as a company. This one was sold as a company: the purchase agreement, called a Membership Interest Purchase Agreement, transferred all the ownership interests in NextGen Tech, LLC, a Texas limited liability company doing business as Complexity Gaming. Membership interests are the shares of a limited liability company.

The parties were three. The buyer was Global Esports Properties, LLC, a Delaware company. The seller was GameSquare Esports (USA), Inc., a Nevada subsidiary that was the sole member of the company being sold. GameSquare Holdings, the listed parent, signed as what the agreement calls the beneficial owner.

Selling the company rather than its assets has a consequence for the buyer: the contracts, rights and obligations of NextGen Tech moved with it. The agreement says the interests were sold free and clear of encumbrances, the legal term for claims and charges held by third parties. It also carries indemnification obligations: promises to compensate the buyer for losses covered by the agreement, such as those arising when a statement the seller made about the business proves untrue.

The press release added one condition. Closing still required approval by the TSX Venture Exchange, a Canadian market on which GameSquare's shares then traded.

How the price is built and adjusted

Here the headline price was not the number that changed hands. The purchase agreement starts from a figure it calls the Closing Purchase Price, US$9,750,000, and then corrects it for the state of the business on the closing date.

Working capital is the money tied up in the day-to-day running of the business: what customers owe it, minus what it owes suppliers. Setting a target of zero meant that any surplus at closing raised the price and any shortfall lowered it.

The figures used at closing are estimates. Within 90 days, the agreement gives the buyer the task of preparing final figures and calculating what it calls the Post-Closing Adjustment. The seller then has a 30-day review period to object, followed by a 30-day period to negotiate. Points still in dispute go to an independent accounting firm, which acts as an expert rather than an arbitrator and must stay within the range of values each side proposed.

The adjustment is where seller financing shows its logic. The agreement does not ask anyone to wire money: if the adjustment is positive, the principal of the note is increased; if it is negative, the principal is decreased, in both cases as if the change had applied from closing. The cash paid at closing does not move. The press release gave a total consideration of US$10.36 million, while the cash and the note added up to US$10,357,693 on the day. Later GameSquare filings stated the principal at US$9.5 million, according to The Esports Advocate.

Inside the promissory note

The note is the heart of the arrangement. It was issued on March 1, 2024 by Global Esports Properties, the maker, to GameSquare Esports (USA), the payee, for a principal of US$9,607,693.

Its interest rate was 3% a year, calculated on a 365-day year. The interest was payable annually but paid in kind: instead of being paid in cash, each year's interest was added to the principal. The press release put the same idea in plainer words, describing the interest as paid in a balloon payment at the end of the term. Any overdue amount bore a default rate of 8% a year.

There were no scheduled repayments of principal. Everything, principal and accrued interest included, fell due in cash 36 months after issue. Later filings gave that date as February 28, 2027, according to The Esports Advocate.

Interest paid in kind makes the debt grow while it is outstanding. As a worked example, assume the original principal, no adjustment and no early repayment, with 3% added once a year. The amount owed would rise to about US$9.90 million after one year, US$10.19 million after two and US$10.50 million at maturity: almost US$900,000 more than the sum first lent, all payable on one day. These are illustrative figures built on the note's stated terms; the actual balance depended on the adjustment and on any repayment.

The note also limited what either side could do with it. The payee could not transfer the note without the maker's prior written consent, and the maker could not pass its obligations to someone else without the payee's consent. In practice, the seller could not simply sell the debt to an investor to get its money sooner.

Paying early, by choice and by obligation

The buyer could repay at any time without a premium or penalty. A voluntary payment went first to accrued interest, then to fees and expenses, and only then to principal.

One clause turned early repayment into an obligation. If the buyer or its subsidiaries raised money from third parties, through debt or through equity, the buyer had to pay the seller 50% of the gross proceeds above US$500,000. The press release mentioned only equity in describing this clause; the note itself names third-party debt as well.

The buyer also had to warn the seller at least three business days before committing to such a financing, with a summary of its material terms and its planned closing date. The note spares the buyer from naming the source of the money or the valuation it implies, and treats what it does share as confidential.

The clause ties the seller's recovery to the buyer's ability to raise money. A buyer that attracts new investors pays down the note as it grows; a buyer that cannot raise money pays nothing until maturity. The steps above show that a note of this kind produces no cash for the seller during its life unless the buyer raises outside money or chooses to repay early.

What the security covers

A note on its own is an unsecured promise. GameSquare's note was backed by a separate security agreement of the same date, which gave the seller a security interest, a legal claim over the buyer's property that can be enforced if the debt is not paid.

The grantor of that interest was Global Esports Properties itself, the buying company. The collateral it pledged was broad. It covered its goods, inventory and equipment included, software, instruments, investment property, deposit accounts and money, general intangibles, and all copyrights and trademarks, with trade names, logos and the goodwill attached to them. Copyrights and trademarks together form what the agreement calls the intellectual property. Property acquired later was covered too, along with the proceeds of any of it.

For an esports team, the trademarks are the name and the logo that fans, sponsors and leagues know. Pledging them means that the brand stands behind the debt.

The agreement also bound the buyer while the debt was outstanding. It could not sell, license or place another lien on the collateral without the seller's written approval, apart from sales of inventory and licenses in the ordinary course of business, and the disposal of obsolete assets. It had to notify the seller within three business days of moving collateral, give fifteen business days of notice before changing its name or its jurisdiction, keep the assets insured and allow inspection. It represented that the seller's interest would be first priority, ahead of other creditors, once the seller had taken the steps needed to make it effective.

That last step is called perfection. The agreement lets the seller file financing statements, public notices that it holds a security interest, describing the collateral as all assets of the grantor. The security interest ends when the obligations are paid in full, and the seller must then sign the documents that release it.

Set-off: when the buyer pays less

The purchase agreement gives the buyer one more way to reduce what it owes. Under Section 2.04, headed Offset Against Seller Note, the buyer offsets the amount of any losses covered by an indemnification claim against payments otherwise due under the note, once the claim has been finally resolved under the agreement's procedure.

In practice, if a statement the seller made about the business proves untrue and costs the buyer money, the cost is deducted from the note instead of being claimed separately. The note itself provides that its principal changes automatically under the sections of the agreement that deal with the price adjustment and the satisfaction of such losses.

For the seller, the result is that the face value of the note is not a fixed sum. It can move up or down with the closing figures, and move down again with any indemnification claim.

Default and acceleration

The note lists the events that count as a default. They include a payment due in cash and still unpaid ten business days after written notice; insolvency, such as an assignment for the benefit of creditors, a bankruptcy order or a petition not dismissed within 60 days; the dissolution of the maker or a halt to its business; and a breach of the note's other promises not cured within 30 days of notice.

What follows depends on the kind of default. For an insolvency event, all principal, interest and other amounts become due automatically. For the others, the payee may declare the principal immediately due, which is called acceleration. The maker also bears the costs of collection, reasonable attorneys' fees included. Disputes go to the Delaware Court of Chancery, and the parties waive a jury trial.

The security agreement adds what the seller may do with the collateral while a default continues. It may accelerate the debt, take possession of the collateral without demand or legal process, require the buyer to assemble and deliver it, sell or otherwise dispose of it at a public or private sale in accordance with the law, and enforce payment with the remedies the law provides.

What the law adds after a default

Both documents are governed by Delaware law, and the security agreement refers to the state's Uniform Commercial Code, the body of rules on commercial transactions that each American state enacts. Its Article 9, Part 6, sets out what a secured creditor may do after a default, and what it may not.

The creditor may take possession of the collateral, through the courts or without them if it proceeds without breach of the peace. It may sell, lease, license or otherwise dispose of the collateral. One rule governs that disposition: every aspect of it, method, manner, time and place included, must be commercially reasonable. Before disposing of the collateral, the creditor must in most cases send a reasonable signed notification of the disposition.

The proceeds then settle the account. The creditor must pay any surplus to the debtor, and the obligor remains liable for any deficiency, the part of the debt the sale did not cover.

There is a second route, sometimes called strict foreclosure. The creditor may accept the collateral itself in full or partial satisfaction of the debt, but only with the debtor's consent. For partial satisfaction, that consent must be given in a record signed after default; for full satisfaction, it may also follow from a proposal by the creditor to which the debtor does not object within 20 days. Until the creditor has collected, disposed of or accepted the collateral, the debtor may still redeem it by paying what is owed.

What the seller's accounts show

A seller that takes a note does not record it at its face amount. GameSquare valued the Complexity note at US$7.1 million at closing and recognized a gain of US$3.0 million on the sale, according to The Esports Advocate's reading of its annual report. The face value of the note was US$9,607,693.

The value at closing sat about US$2.5 million below the face amount. After that, the question became whether the buyer would pay. An allowance for credit losses is the amount a lender sets aside for what it no longer expects to collect.

In its quarterly report for the period ended September 30, 2025, GameSquare said no allowance for credit losses had been recognized on the note, The Esports Advocate reports. By December 31, 2025, it had recorded a reserve of US$8.1 million, and its annual report, filed on April 8, 2026, said it expected to collect the remaining US$0.5 million through a settlement with the buyer. Its quarterly report for the period ended June 30, 2026 carried the note at US$549,000, unchanged from the end of 2025. Neither 2026 quarterly report describes a settlement.

A reserve does not cancel the debt. It changes the value the seller gives the debt in its own accounts.

Where the Complexity deal broke

On September 23, 2026, Lake announced in a video on X that Complexity had ceased operations, and said the decision to shut down had been taken at the end of 2025. Among the reasons he gave, The Esports Advocate reports, were the organization's prospects of raising the capital needed to pay off the seller-held note.

The clauses of the note explain why that mattered. The debt was growing through interest paid in kind, it fell due in one payment, and any new money raised above US$500,000 would have sent half of the gross proceeds to the seller. For a buyer looking for investors, half of any new money above that threshold would have gone to the previous owner rather than to the team.

Complexity's intellectual property has since been transferred back to GameSquare, Dot Esports reported, according to The Esports Advocate. The trademarks were part of the collateral. The filings published so far do not say whether the rights came back through enforcement of the security or through the settlement the annual report expected, and the same outlet lists that question among those still open, with what Lake's investors lost.

How any one seller-financed sale ends depends on its own documents and on the buyer's position when payment falls due. GameSquare's quarterly report for the period ending September 30, 2026, due in November, will be the first of its filings to cover the weeks in which the shutdown and the return of the rights were announced.

The .esports registry publishes Esports Observer, so the whole scene can read its news for free.