Buff Technologies, which operates a loyalty platform for gamers, is significantly diluting its investors. The company announced a capital raise through a share issuance to 14 private investors, who will collectively hold 23.5% of its shares. Buff will initially raise NIS 10 million, with warrants granted to the investors. If exercised, an additional NIS 9.5 million will be injected into Buff, bringing the investors' stake to roughly 30%. Not only are existing shareholders facing heavy dilution, but it is happening at a deep discount—the offering price was set at NIS 13 per share, while on the same day the raise was announced, the stock closed at NIS 18.77, representing a 30% discount.

Buff is one of the many companies that went public in 2021, only to destroy substantial shareholder value since. The company initially raised NIS 30 million at a valuation of NIS 130 million, but the stock has since plummeted 63.5%, with its current market cap standing at just NIS 50 million. We've covered similar companies before—those that lack cash, may have revenue but remain unprofitable, occasionally report a deal or some positive update to boost the stock, then issue new shares and dilute investors, only to repeat the cycle. Examples include Pomvom, which raised capital and diluted its investors, UroGen, which capitalized on a stock surge to raise $107 million, and Innoviz, which issued shares at a 13% discount after a twofold jump in its stock price.

As of the end of Q2 2024, Buff had $428,000 in cash, but it burned through $467,000 during that period—meaning it is on pace to burn approximately $934,000 for the full year.

Buff’s business model: A gaming community with an ad-based revenue stream

Buff has developed a platform designed to create a community for gamers. It integrates with popular games like Fortnite and Minecraft, allowing users to connect their gaming accounts to Buff’s platform, interact with other players, and earn points by completing in-game tasks—points that can be redeemed for various digital rewards. The company generates revenue either from ads shown to non-paying users or from premium subscribers that remove ads.

Recently, Buff’s advertising campaigns business has been growing. The company has built a strong gamer community and is leveraging it to offer ad solutions for brands looking to reach this demographic. For example, a brand partners with Buff, which then creates a campaign—potentially a sponsored tournament within a popular game—while the brand pays Buff a one-time fee.

Capitalizing on stock momentum, Buff raised funds at a 30% discount

Buff has recently reported several deals that lifted its stock price, which is up 60% year-to-date. It announced multiple contracts worth several million dollars, including deals totaling $1-1.2 million in January alone, and an additional commitment for at least $4.1 million in campaigns throughout 2025. In the first half of 2024, the company's revenue reached $3.57 million.

The company also disclosed the investors participating in the private placement and their respective investments: The largest investors are IBI Hedge Fund and Ayalon Mutual Funds, investing NIS 2 million and NIS 2.5 million, respectively, for stakes of approximately 6% and 7.4%. Hatzavim Hedge Fund is investing NIS 800,000 for a 5.9% stake. The investors received warrants at no cost, with an exercise price of NIS 19 per share. If all warrants are exercised, the investors' stake could increase to 30%. CEO Ilay De-Bar, who was the largest shareholder before the raise with a 14.32% stake, will see his ownership drop to roughly 10%. The public, which held 20.5% of the shares before the offering, will see its stake diluted to 14.4%.

Buff’s future: More revenue but continued cash burn

Buff is expected to report approximately $7 million in revenue for 2024, though it may still post a loss and is projected to burn nearly $1 million in cash this year—largely because two-thirds of its workforce consists of developers who command high salaries. Speaking with Bizportal, CEO Ilay De-Bar insists that Buff is still a technology company, emphasizing that its platform is technology-driven and remains the company’s core. However, in practice, Buff is increasingly looking like an advertising company—its platform’s business model is based on ad revenue, and its fastest-growing segment, the campaign business, is essentially advertising services for brands.

There’s nothing inherently wrong with being an advertising company, but there seems to be a misalignment between how Buff presents itself and what it actually does. This disconnect might explain why investors have lost 63.5% since the IPO. That said, some investors are now optimistic, seeing signs that Buff has found its footing—the stock is up 57% year-to-date. However, it’s important to note that the campaign business relies on one-off deals, making revenues volatile, with no guarantee of continued growth.

CEO Ilay De-Bar: "We’re a tech company, but we’ve built revenue streams on top of that"

What are Buff’s core activities?

"We’ve built a platform that sits atop the most popular games—Fortnite, Minecraft, Roblox, and more—to enhance the gaming experience. We started in PC gaming, and to complement that experience, we introduced a loyalty program where users earn points and redeem them for digital goods. Our business model is freemium—we primarily generate revenue from ads, but users can subscribe to remove them. Our fastest-growing segment is direct advertising campaigns—large brands looking to reach gamers."

Are these campaign deals one-off?

"Yes, but the advantage for us is that all these events happen within Buff’s platform."

Do you expect more orders in the future?

"We hope so, but we don’t know yet. We’ve signed a framework agreement worth at least $4.1 million for 2025, which could expand."

What differentiates you from other platforms?

"Unlike Discord, which is just a communication tool, we offer a gaming community where users can engage and earn rewards for playing different games on our platform."

Who are your main competitors?

"Primarily major game developers that have their own loyalty programs. The difference is that their programs are limited to their own games, while we span a broader range of titles—and we’re now expanding into mobile as well."

So, are you an advertising company or a technology company?

"While a portion of our revenue comes from advertising—whether from brand campaigns or the ads shown on our platform—Buff is fundamentally a technology company. Two-thirds of our team are developers, and our revenue streams are built on the technology we’ve created."

With this latest fundraising round, investors could own up to 30% of the company. Do you expect any strategic input beyond the capital?

"In public market fundraising, you typically don’t expect strategic input, and that’s the case here as well."

Why did you raise at such a steep discount? Were you comfortable with that level of dilution?

"I took the biggest dilution hit myself. These were the market conditions at the time, and we believed they were the best terms available. I wouldn’t have done it if I didn’t think it was in the best interest of the company and our investors."

Do you anticipate additional capital raises?

"No, what we have should be sufficient for the foreseeable future."

How significant is your partnership with Isracard?

"The goal is to help Isracard reach a younger audience. We also partnered with the Reichman University Student Union to issue their official credit card. Right now, the Isracard deal isn't a major revenue driver, and it’s hard to predict how it will evolve."

Any message for investors?

"We were part of the 2021 IPO wave, and like many companies, we needed time to go through transformations and improve—including management changes and getting on a growth trajectory. The investors who believed in us can now see that we’re on the right path, and I hope we can continue building on that momentum."