An update was posted today by the @lolesports team concerning the removal of the racist shareholder in LCS team Echo Fox. Two months ago, the LCS set a deadline of July 15 to take action against this shareholder, after rumors spread of a racist shareholder within the organization. However, earlier today, the team received a 7-day “compliance” extension.
How did we get here?
Everything started on May 5 when the scandal broke of racial characterizations by one of Echo Fox’s main shareholders, Amit Raizada. Allegedly, Mr. Raizada referred to Jace Hall, the CEO of Twin Galaxies and Echo Fox, by using the n-word in an email. After the emails leaked, Rick Fox stated his intentions to leave the organization behind. Rick Fox is best known as an actor, former pro-basketball player, and founder of Echo Fox.
After the initial heat died down from the story, Rick Fox did decide to remain with the organization. However, he had a condition: that Echo Fox remove Mr. Raizada as one of their shareholders.
What does this extension mean for Echo Fox?
The extension means surprisingly little once you understand why they got it. It’s a simple business decision, really. In the US, companies have to file with the US Securities and Exchange Commission surrounding their earnings and other financials for each quarter of the year. For Echo Fox, the deadline to submit this report to the US Securities and Exchange Commission was July 15.
Removing a shareholder, especially one as large as Mr. Raizada, will cost Echo Fox a lot of money. Since he is unlikely to go willingly, they would likely pay above market value for his shares. By using the 7-day extension, negotiated with Riot Games, they can report this loss on the next quarter’s report, rather than the current quarter’s report. Companies often do this in an attempt to stabilize the stock value. This allows the organization to recover over a longer period of time from this loss.