Genius and Legend, including their respective subsidiaries, have operated and, until the completion of the Legend Acquisition, will continue to operate independently. It is possible that the pendency of the Legend Acquisition, as well as the integration process, could result in the loss of key executives and employees, the loss of customers, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs, an overall post-completion integration process that takes longer than originally anticipated, as well as the disruption of each company’s ongoing businesses. Any or all of those occurrences could adversely affect our operations, including the ability to maintain relationships with customers and employees prior to, or after, the Legend Acquisition or to achieve the anticipated benefits of the Legend Acquisition.
If the Legend Acquisition is consummated, our shareholders’ ownership percentage will be diluted. Substantial future sales by the Seller Parties following the completion of the Legend Acquisition, or the perception that such sales may occur, could depress the price of Genius ordinary shares.
A significant component of the consideration in connection with the Legend Acquisition is payable (or may be paid) in Genius ordinary shares. At the closing of the Legend Acquisition, Genius would issue to the Seller a number of Genius ordinary shares equal to $100,000,000 divided by a specified 30 trading-day volume weighted average trading price of Genius ordinary shares. As a result of the issuance of these shares, our shareholders will own a smaller percentage of Genius after the Legend Acquisition is completed and will therefore have a reduced voting interest after the closing of Legend Acquisition. In addition, the earn-out consideration in the amount of $300,000,000, payable in two tranches, each of up to $150,000,000, can be paid in cash or Genius ordinary shares. If we elect to pay such earn-out consideration in Genius ordinary shares, the ownership percentage of our shareholders will be further diluted.
Furthermore, while the share consideration to be issued will be subject to lock-up and orderly sell down restrictions, substantial future sales of Genius ordinary shares by the Seller Parties following the completion of the Legend Acquisition and the expiry of the applicable lock-up period, or the perception that such sales may occur, could depress the price of Genius ordinary shares.
Following the completion of the Legend Acquisition, Genius will be subject to the risks that Legend faces, in addition to the risks faced by Genius.
Legend operates in a highly regulated sports and gaming media space, which is subject to complex, evolving, and often inconsistent regulatory frameworks across multiple jurisdictions. The Legend Acquisition will also expand the number of customers that will be held by the combined business, particularly in the online gaming sector. As a result, the acquisition will expose Genius to a broader array of regulatory and compliance risks, including, but not limited to, licensing requirements, advertising restrictions, anti-money laundering obligations, data privacy and protection mandates, and responsible gaming standards, among others. Any failure to comply with applicable regulations, including as a result of actions taken by Legend prior to the completion of the Legend Acquisition, could result in significant fines, penalties, suspension or revocation of licenses, or other enforcement actions. Furthermore, the process of integrating Legend may reveal previously unidentified regulatory issues, compliance gaps or liabilities. Any of these matters, individually or in the aggregate, could have a material adverse effect on our business, cash flow, financial condition or results of operations. There can be no assurance that we will be able to successfully manage these additional risks or that the anticipated benefits of the Legend Acquisition will be realized.
We may be exposed to increased litigation as a result of the Legend Acquisition, which could have an adverse effect on our business, financial position, results of operations and cash flows.
We may be exposed to increased litigation from shareholders, customers, suppliers and other third parties due to the combination of our and Legend’s businesses following the Legend Acquisition. Any such litigation, whether with or without merit, could result in significant costs, diversion of management’s attention, injunctions or other restrictions on our business operations, and the payment of substantial damages, settlements, or licensing fees. In addition, adverse outcomes in such proceedings could, among other consequences, result in the loss of important intellectual property rights, limitations on our ability to use certain technologies, brands, or content, or the need to redesign products or services. The integration process may also reveal previously unidentified or contingent liabilities relating to litigation or intellectual property, which could further increase our exposure. Any of these risks, individually or in the aggregate, could have a material adverse effect on our business, financial position, results of operations, and cash flows, or may cause disruptions to our operations.
We may not be able to retain our and Legend’s existing customers, suppliers and other business partners which could have an adverse effect on our business and operations following completion of the Legend Acquisition. Third parties may terminate or alter existing contracts or relationships with us or Legend.
As a result of the Legend Acquisition, we may experience impact on relationships with customers and suppliers that may harm our business, financial position, results of operations and cash flows. Certain customers and suppliers may seek to terminate or modify contractual obligations following the Legend Acquisition, whether or not contractual rights are triggered as a result of the Legend Acquisition. There can be no guarantee that our and Legend's existing customers and suppliers will remain with or continue to have a relationship with us or do so on the same or similar contractual terms following the Legend Acquisition. If any of our or Legend's existing customers or suppliers seek to terminate or modify contractual obligations or discontinue the relationship with us or Legend, then our business, financial position, results of operations and cash flows may be harmed.
Genius and Legend also have contracts with other business partners, including lessors of office space, which may require Genius or Legend, as applicable, to obtain consent from these other parties in connection with the Legend Acquisition, or which may otherwise contain