Motorsport Games adopts a poison pill as Red Oak's stake reaches 11%

Motorsport Games, the Nasdaq-listed company behind the racing simulation Le Mans Ultimate and the Le Mans Virtual Series, an esports competition it creates, has put up a defense against anyone buying control of it on the open market. On July 22, 2026, the company announced from Miramar, Florida, that its board had unanimously adopted a limited duration stockholder rights plan, effective immediately. Such a plan is better known by its nickname, the poison pill.

The board gave two reasons in its announcement. It believes the share price does not reflect the inherent value of the business or its long-term growth potential, and it says certain stockholders have recently made significant accumulations of the company's Class A common stock. It did not name them.

The Esports Advocate named one the next day. The outlet reported on July 23 that Red Oak Partners, an investment manager based in Boca Raton, Florida, has disclosed 458,581 shares, about 11% of the outstanding Class A stock. The plan is triggered at 12.5%.

What the board adopted on July 22

A rights plan gives every stockholder a right that is worth nothing in normal times and becomes valuable only if one buyer crosses a set line. Motorsport Games declared a dividend of one right for each outstanding share of Class A common stock, to holders on record on August 3, 2026, the announcement says. The plan expires on July 20, 2027, unless it ends earlier under its own terms.

The line is 12.5% of the Class A stock, counted as beneficial ownership, a legal measure of who really controls a share. In this plan it includes derivative securities, contracts whose value follows the share without being the share itself.

The company states that the plan was not adopted in response to any specific takeover bid or other proposal to acquire control. It adds that the plan is not meant to interfere with a sale, a merger, a tender offer or another combination approved by the board, and that it is similar to plans adopted by other public companies. The stated aim is to reduce the chance that someone gains control through open-market buying without paying all stockholders a control premium, the extra price a buyer normally pays for command of a company.

The effect is dilution. Every other stockholder can buy new shares at half their market value, and the investor that crossed the threshold cannot, so its percentage shrinks. The company presents the plan as a way to give the board time to make informed decisions in the interest of all stockholders.

The investor closest to the line

Red Oak Partners was founded in 2003 by David Sandberg, The Esports Advocate writes. Its long fund looks for small North American listed companies it considers overlooked and mispriced.

As of June 30, Red Oak and affiliated funds held 442,644 Motorsport Games shares, or 10.6%, according to the outlet's reading of the filings. Purchases on July 1 and July 2 raised the position to 458,581 shares, about 11%. That leaves roughly a point and a half between Red Oak and the 12.5% trigger.

The Esports Advocate is careful about the link between the two facts. Red Oak is the clearest disclosed accumulation, it writes, but the filings do not establish that it was the only reason, or the main one, for the board's decision.

Red Oak's fund says of itself that it may use shareholder activism opportunistically, the outlet reports, and it has done so before. In 2023, at the staffing firm GEE Group, Red Oak nominated directors and submitted proposals. A cooperation agreement followed: Sandberg and a second nominee joined the board, and Red Oak withdrew its nominations and accepted limits on its buying and voting. The Esports Advocate found no other disclosed Red Oak investment in a game publisher, an esports company or a sim racing platform.

New rules for stockholder meetings

The rights plan was not the only measure. On the same day, July 22, the board adopted amended and restated bylaws, the internal rules of the company, disclosed in a separate Form 8-K, the report a listed American company files when something material happens.

The Esports Advocate summarizes three changes. The board or the chair of a meeting gets broad authority over the agenda, attendance, speaking time, questions and recording devices. The chair may adjourn or recess a meeting for any reason or for none, and the board may postpone or cancel a meeting after public notice. And the requirements for a stockholder who wants to nominate a director or submit a proposal are expanded: more notice, and more disclosure about ownership, derivatives, agreements, intentions and relationships with the company.

Candidates for the board may also have to fill in company questionnaires, make statements on conflicts of interest and outside pay, and be interviewed by the board. The outlet's reading is that none of this prevents a proxy contest, a campaign in which an investor asks other stockholders to vote for its own candidates, but that it adds procedural hurdles to one.

How the share register opened up

Until this spring a hostile approach would have met a controlling stockholder. Driven Lifestyle Group, formerly Motorsport Network, held 700,000 Class B shares, a second class of stock that carried enhanced voting rights.

That ended in April. Under an agreement dated April 22, 2026, Motorsport Games bought back 904,395 Class A shares from Driven Lifestyle at US$4.11 a share, about US$3.7 million, and all the outstanding Class B shares were cancelled, the company said in its first-quarter results. Driven Lifestyle kept 254,453 Class A shares, The Esports Advocate reports.

With the super-voting shares gone, that control ended, and purchases of ordinary Class A stock became more significant, the outlet observes. Governance amendments effective in May then removed the ability of stockholders to act by written consent, the outlet adds: decisions must now be taken at a formally called meeting, the very setting the new bylaws regulate.

The largest holder is already above the threshold

The biggest disclosed investor is not Red Oak. Sharp Arrow Global Tech Ventures, a partnership registered in the British Virgin Islands, took part in a US$2.5 million private placement, a sale of new shares to chosen investors, completed in April 2025 and led by the virtual-reality headset maker Pimax. The company's 2026 proxy statement identifies a Pimax company as a Sharp Arrow affiliate, The Esports Advocate writes.

A table drawn up before the April repurchase listed Sharp Arrow at about 1.46 million shares, pre-funded warrants included, or 26.82% of the Class A total used for the calculation. A pre-funded warrant is a right to receive a share whose price has almost entirely been paid in advance. The investment also brought a Sharp Arrow nominee, Guoquan Huang, onto the board.

Because Sharp Arrow already exceeds 12.5%, its existing position is generally exempt. Buying more could trigger the plan, depending on the plan's calculation rules and exemptions, the outlet notes. It found no updated Sharp Arrow filing that reflects the lower share count since April, and no disclosed relationship between Red Oak and Sharp Arrow or Driven Lifestyle.

A company that had just turned profitable

The board's view that the shares are undervalued follows a quarter in which revenue more than doubled. Motorsport Games said on May 13 that revenue for the first quarter of 2026 was US$4.0 million, against US$1.8 million a year earlier, a rise of 129.3%. Gross margin went from 73.5% to 87.2%. Net income was US$1.0 million in both quarters, and adjusted EBITDA, a measure of operating profit before interest, taxes, depreciation and some one-off items, rose from US$0.6 million to US$1.5 million.

"The progress we have made in transforming this business is now visibly consistent," Stephen Hood, the president and chief executive, said in that release.

Le Mans Ultimate was the main driver of that growth, with its paid add-on content and the subscriptions to RaceControl, the company's online platform, The Esports Advocate writes. Motorsport Games is the officially licensed developer and publisher for the 24 Hours of Le Mans and the FIA World Endurance Championship. Version 1.3 came out in March 2026, the month the game reached an all-time peak of more than 8,800 players connected at once, the company said. The company said it is working on plans to take the game to console, and described a new interface framework as vital for that. The company also owns the rFactor 2 and KartKraft platforms and describes itself as the esports partner of the 24 Hours of Le Mans.

Cash is the tighter figure. The company held US$5.9 million at the end of March and US$3.8 million in April, after the repurchase, partly offset by a US$1.2 million drawdown under a business loan agreement with Citibank. The company also said it secured a US$3.0 million revolving line of credit in February. Operations brought in roughly US$0.5 million a month in the first quarter.

The listing itself was in question not long ago. In November 2024, Nasdaq notified the company that its stockholders' equity had fallen below the US$2.5 million required to stay listed, The Esports Advocate recalls. Compliance was regained in April 2025, after the Pimax-led financing. The July filings show no new deficiency.

The dates that follow

Two dates are fixed by the plan. Stockholders on record on August 3, 2026, receive the rights, and the rights lapse on July 20, 2027, unless the board redeems or terminates them first. The company said a Form 8-K with the full terms would be filed with the Securities and Exchange Commission.

The filings leave two things open, in The Esports Advocate's account: which accumulations the board had in mind, and how much of the company Sharp Arrow holds now that fewer shares are outstanding.

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