ASX stock of the day: Emerge Gaming (ASX:EM1) shares rocket more than 20%

Emerge Gaming Ltd (ASX: EM1) sahres are up close to 20% today. Here;s why this eSports company is in investors' good books

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The Emerge Gaming Ltd (ASX: EM1) share price is rocketing today, up 19.4% at the time of writing to 8 cents. Emerge Gaming shares closed at just 6.7 cents yesterday, but opened at 7 cents today after a brief trading halt (more on that later), and climbed even higher afterwards, hitting 8.6 cents a share at one point.

Today's move caps off what has been a wild few months for Emerge Gaming shares. As recently as May 2020, the company's shares were trading for just 1 cent apiece. However, the shares spiked back in October, climbing as high as 19 cents, representing a year-to-date gain of 600% and a 1,300% gain since 25 May. On today's prices, Emerge shares are still up 305% year to date, but also down more than 42% from October's highs.

So what is Emerge Gaming? And why are the company's shares going ballistic today?

What does the company do?

Emerge Gaming is a company placing itself in the middle of the eSports market. eSports refers to the 'sport' of competitively playing video games. Emerge claims this market is projected to grow to US$1.48 billion in terms of revenue this year.

According to Emerge, it is "changing the eSports gaming landscape" with its flagship 'Arcade X' platform for eSports tournaments.

Arcade X reportedly offers players a "unique and mature gaming experience" through a "hybrid environment" which offers access to both casual and eSport gaming. Emerge states that "with top of the line technological integrations and explored user experiences, it [Arcade X] is without a doubt going to change the way the corporate world and gaming world engage in the future". This platform has apparently been in operation for two years, and has close to 40,000 registered users from around the world.

Emerge also offers a gaming and mobile platform called 'Cloudzen' as an "entertainment platform as a service". Cloudzen offers "various means of communication channels" through game stores, gaming communities and social networking.

However, the company has been in the news for the wrong reasons of late. Just last week, Emerge shares crashed 50% on news that one of the company's platforms – 'Miggster' – had managed to sign up just 25,764 subscribers after attracting more than 6 million 'pre-registrations'.

Why is the Emerge share price rocketing today?

Today's massive spike in the Emerge share price appears related to an ASX announcement the company released just after market open this morning. In this announcement, Emerge told investors a platform called 'MTN Arena' has registered 80,000 new subscribers in South Africa since its launch back in July of this year. MTN Arena is owned by the MTN Group, a public company listed on the Johannesburg Stock Exchange. However, it is operated by Emerge Gaming software.

Emerge and MTN inked an agreement to "distribute, market and operate Emerge's platform technology under the brand "MTN Arena" in South Africa" back in June.

These MTN Arena subscribers are monetised as well, with the use of MTN Arena apparently costing subscribers 3 South African rand (or roughly 26 cents) a day (or $7.80 a month). Emerge reportedly earns 40% of the "net revenue" of this arrangement.

Further, Emerge told investors the two companies are continuing to aggressively market MTN Arena to the "circa 29 million MTN subscribers in South Africa". This is being executed through paid media campaigns, specifically:

…targeted digital campaigns across multiple digital channels and bulk SMS… These campaigns target the middle to low-income mass market promoting tournaments, competitions and prizes through key messaging, video and other digital content in the distribution channels.

It appears investors like what they hear with this update, judging by the performance of the Emerge share price today.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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