Mighty Kingdom investors called to vote on boardroom clear-out
Shareholders in South Australian game studio Mighty Kingdom will continue to try and oust the board in January.
Mighty Kingdom’s journey from a celebrated Australian gaming success story to a company mired in controversy and boardroom power struggles presents a dramatic case study in corporate governance and strategic missteps.
And it seems that the fight over the studio’s future will continue to walk into the new year, with an extraordinary general meeting called for January 19.
The agenda? Whether to replace the entire board.
An email to shareholders on December 21 called for votes on the removal of current board directors David Butorac, Phillip Mayes and Ian Hogg. Shareholders will also be able to vote on the proposed appointment of Shane Yeend, Roseanne Healy, Keith Middleton and Boris Patkin.
This move follows the removal of former ABC CEO Michelle Guthrie as the chairman of Mighty Kingdom’s board back in November. This campaign was led by Gamestar Studios’ Shane Yeend, a major shareholder in Mighty Kingdom and its former short-lived CEO.
This followed the resignation of Phil Mayes — founder of Mighty Kingdom — in January. Simon Rabbitt is currently serving as interim CEO of the business.
After a tumultuous few years for the company, Yeend and the Mighty Kingdom board are battling for its future. But to understand how we go here, it’s worth taking a step back.
Mighty Kingdom’s rise and decline
Founded in 2010, Mighty Kingdom gained acclaim for its innovative work with global brands like Lego and Disney, and for fostering a progressive work environment. This reputation was bolstered by its initiatives such as a four-day work week and strong support for mental health. In an industry where burnout and ‘crunching’ are rampant, these moves placed Mighty Kingdom as an industry gold standard.
However, after its IPO on the ASX in April 2021 the company faced immediate challenges — despite raising $18 million from initial investors.
The market’s overall response to its posting was lukewarm, particularly when its major release Conan Chop Chop underperformed. What quickly followed was a significant stock price drop and concerns surrounding the company’s viability.
At the time of writing, Mighty Kingdom’s share price was sitting at $0.017.
Further compounding these issues were allegations of intellectual property theft and fraud regarding Kitty Keeper — a mobile game that Mighty Kingdom was paid to develop. It also helped them to receive a $480,000 funding grant from the South Australian government.
The alleged failure of this title — and subsequent removal from the App Store — after launch brought into question Mighty Kingdom’s management of the project and claims over the game’s intellectual property by the creator, Justin Daley.
However, despite complaints from Daly, the same government department that awarded Mighty Kingdom the grant has said that Daley’s “claim of ownership of IP in the game is not clear-cut”.
Regardless, these allegations, redundancies in late 2022, and increased reliance on government subsidies and tax rebates have painted a picture of a company struggling to maintain financial stability.
Boardroom turmoil
The crux of Mighty Kingdom’s crisis lay in the escalating tension between the company and its major shareholder, Gamestar, led by Shane Yeend. Yeend launched a campaign to revamp the company’s board earlier this year, culminating in his call for an extraordinary general meeting, and Guthrie’s departure, in November.
According to Guthrie, Gamestar didn’t deliver on its financial commitments to Mighty Kingdom. Yeend defended against this allegation.
“We had the money to do the deal coming, but the company had breached the share subscription agreement so we weren’t going to transfer anymore,” Yeend said at the time.
“I had already given them $2 million that they’d wasted.”
This power struggle brought to light deeper issues within the company’s governance and strategic direction. Amidst these tensions, Mighty Kingdom was accused of misleading the market and failing to lodge substantial shareholder notices, raising serious questions about its corporate governance practices.
The dispute over Gamestar’s financial commitments, including the non-payment of roughly 50% of its pledged $4 million investment, further exacerbated the situation.
This culminated with Guthrie stepping down as chair in November. As part of her departure she took responsibility for the company’s “past unsustainable cash burn”.
This move signaled a major shift in the company’s leadership landscape, which will continue into the new year. While the board may not have been entirely replaced at the last extraordinary meeting, it will be attempted again in January.
January blow up
In a letter to shareholders on December 22, the Mighty Kingdom board recommended voting against their replacement, as proposed by requisitioning shareholders — Imagination Entertainment, Gamestar Studios and Yeend Superannuation.
“We acknowledge that the past few months have been very disruptive, but we are committed to remain focused on building on the recent positive results and ensuring MKL’s long-term financial success,” the board said.
“The resolutions fail to detail any strategy, financial security, or positive direction for Mighty Kingdom. This is change for the sake of change without benefit or purpose.”
The letter went on to say that the current board has extensive experience in the video game, entertainment and creative industries.
“The board’s expertise contrasts with Gamestar’s proposed board with a lack of experience in the industry and a failure to propose any concrete strategies for growth,” the board said.
The letter also takes aim at Gamestar, saying it is attempting to gain control of Mighty Kingdom “without a financial plan as potentially harming shareholder value”.
It also alleged that Gamestar has repeatedly failed to meet its obligations to Mighty Kingdom and that Yeend has “repeated false and negative public statements about the Company, damaging MKL’s reputation and shareholder value”.
“Mr Yeend has had the opportunity to take charge of Mighty Kingdom whilst he was CEO, however he chose to leave without notice.
“MKL has written an invitation for Gamestar to participate in the strategic review process and have not, as at the date of this notice, submitted a proposal.”
A letter to Mighty Kingdom shareholders from Imagination Entertainment reveals its reasons for the proposed board replacement, including the share price drop from $0.28 on April 21, 2021 to $ 0.009 on October 27, 2023. It also points to alleged losses of roughly $35 million.
“As a Mighty Kingdom Shareholder that is unacceptable. They have built zero games that have produced any returns to shareholder value since listing,” the letter reads.
“The Mighty Kingdom board must change.”
Disclosure: the author owns a small portion of shares in Mighty Kingdom.
