Motorsport Games Implements Poison Pill Strategy as Red Oak’s Stake Approaches 11%

Motorsport Games has implemented a one-year poison pill strategy and revised its shareholder meeting protocols after investment firm Red Oak Partners quickly acquired about 11% of the racing-game publisher listed on Nasdaq.

The board of Motorsport Games approved this stockholder rights plan in response to “recent significant accumulations” of its shares, believing that the current market price did not accurately reflect the company’s true value or future potential. While Red Oak’s investment is the most notable, the company did not specify if it was the sole reason for this decision and clarified that it was not reacting to any specific takeover bid.

As of June 30, Red Oak and its affiliated funds reported ownership of 442,644 shares, equating to 10.6% of the company. Following additional purchases on July 1 and July 2, this stake increased to 458,581 shares, or roughly 11% of the outstanding Class A stock, bringing the firm close to the rights plan’s 12.5% threshold.

Under the new plan, Motorsport Games will issue one preferred-stock purchase right for each outstanding Class A share as of August 3. If any investor or coordinated group surpasses the 12.5% ownership mark, other shareholders will have the opportunity to buy shares at a significant discount, diluting the position of the investor who crossed the threshold. Derivative positions will also be included in this calculation.

Investors already holding more than 12.5% are grandfathered in but generally cannot acquire more shares without triggering the plan. The rights will expire on July 20, 2027, unless the board decides to terminate or redeem them sooner.

Additionally, Motorsport Games filed a Form 8-A to register the preferred-stock purchase rights under Section 12(b) of the Securities Exchange Act for Nasdaq. This filing serves to implement the rights plan rather than establish another defensive measure.

Red Oak Partners, based in Boca Raton, Florida, was founded by David Sandberg in 2003. The firm focuses on underfollowed and mispriced North American micro- and small-cap companies, employing value-driven, catalyst-driven, and event-driven strategies.

The fund has indicated it may “opportunistically employ shareholder activism” to enhance value, a tactic it has previously used to gain board representation. In 2023, Red Oak nominated directors and proposed stockholder initiatives at a staffing company, ultimately reaching a cooperation agreement that allowed its representatives to join the board while withdrawing its nominations.

However, Red Oak’s investment in Motorsport Games was reported on Schedule 13G, which is typically used for passive investments, rather than Schedule 13D, which indicates an intent to influence control. Red Oak confirmed that its shares were not acquired with the intention of changing or influencing control of Motorsport Games, although this does not prevent the firm from altering its plans in the future.

A review of Red Oak’s public materials and SEC filings did not reveal any other disclosed investments in video-game publishers, esports companies, sim-racing platforms, or motorsports-rights businesses.

The filings also did not indicate any relationship between Red Oak and Sharp Arrow Global Tech Ventures, the former parent company of Motorsport Games, or any of its competitors.

The poison pill was accompanied by a separate Form 8-K that outlined amended and restated bylaws adopted on July 22. These new bylaws grant the board or meeting chair extensive authority over shareholder meetings, including control over the agenda, attendance, speaking time, questions, recording devices, and participation. The chair can adjourn or recess a meeting for any reason, while the board can postpone or cancel a meeting with public notice.

The amendments also enhance the advance-notice and disclosure requirements for outside director nominations and stockholder proposals. Nominating investors may need to disclose their ownership, derivatives, agreements with other parties, investment intent, legal proceedings, relationships with the company, and plans typically found in a Schedule 13D.

Director candidates may be required to complete company questionnaires, provide representations regarding conflicts and outside compensation, and participate in interviews with the board.

While these provisions do not prevent a proxy contest, they equip the board with additional procedural tools, making outside nomination campaigns more challenging.

This timing is significant as Motorsport Games recently dismantled the voting structure that allowed Driven Lifestyle Group, previously Motorsport Network, to control the company. In April, Motorsport Games repurchased 904,395 Class A shares from Driven Lifestyle for $4.11 per share, totaling around $3.7 million. Driven Lifestyle also relinquished all 700,000 of its Class B shares, which had enhanced voting rights, retaining only 254,453 Class A shares post-transaction.

The cancellation of Class B shares eliminated Driven Lifestyle’s super-voting control, making accumulations of ordinary Class A stock more impactful. Governance amendments effective in May also removed the ability for stockholders to take action by written consent, mandating that decisions be made at formally called meetings. The poison pill and July bylaw changes further bolster board protections around this meeting-based process.

Sharp Arrow Global Tech Ventures remains the largest disclosed investor in Motorsport Games. This British Virgin Islands partnership participated in a $2.5 million private placement completed in April 2025, which Motorsport Games indicated was led by virtual-reality headset manufacturer Pimax. The 2026 proxy filing identifies Pimax Innovation Co. Limited as an affiliate of Sharp Arrow.

Sharp Arrow is controlled by its general partner, Zhibin “Robin” Weng, the founder of Pimax. This investment led to the appointment of Sharp Arrow-backed nominee Guoquan “Paul” Huang to the Motorsport Games board and granted the investor certain participation and management-nomination rights.

Before the Driven Lifestyle repurchase, a Motorsport Games ownership table indicated Sharp Arrow beneficially owned approximately 1.46 million shares, including shares underlying pre-funded warrants, representing 26.82% of the applicable Class A total. An updated ownership filing reflecting the reduced share count post-repurchase was not found in the review.

Since Sharp Arrow already exceeds the poison pill’s 12.5% threshold, its existing position is generally grandfathered. However, any additional acquisitions could trigger the plan, depending on the rights agreement’s beneficial-ownership calculations and applicable exemptions.

Sharp Arrow’s board representation and existing commercial relationship with Motorsport Games set it apart from Red Oak, whose position is classified as passive.

These governance changes come as Motorsport Games has seen improved operating performance after several years of liquidity challenges, licensing cutbacks, and Nasdaq compliance issues. The company reported first-quarter revenue of approximately $4 million, a 129% increase year over year, along with $1 million in net income and $1.6 million in operating cash flow. This revenue growth was primarily driven by Le Mans Ultimate, downloadable content, and RaceControl subscriptions.

At the end of March, Motorsport Games held $5.9 million in cash, which decreased to about $3.8 million by the end of April, mainly due to the Driven Lifestyle share repurchase, partially offset by operating cash flow and a drawdown from a Citibank credit facility.

In November 2024, Nasdaq notified Motorsport Games that its stockholders’ equity had fallen below the exchange’s $2.5 million continued-listing requirement. The company regained compliance in April 2025 following the Pimax-led financing. None of the July filings indicated a new Nasdaq deficiency.