Acquisition rumors heat up with mobile gaming companies

Investors want one of two things: to have their stocks turn into meme stocks, or get acquired for a big premium. In the gaming industry, acquisition rumors are louder than ever.

Too big to ignore: Mobile gaming

With 55% of US residents gaming during COVID, the gaming industry experienced massive growth. One area grew particularly fast — mobile gaming, which grew 40% from its pre-pandemic levels. With lockdowns ending, that growth is expected to diverge even further:

• PC/console game sales are expected to decline as consumers head out.
• Mobile gaming is expected to keep growing.

For game developers, moving into the mobile market opens up a massive market — one strategy bring to make a mobile version of existing franchise games:

• Riot, owned by Tencent (OTC:TCEHY), released its popular League of Legends game on mobile late last year.
• Activision (NASDAQ:ATVI) expects to release a mobile version of its Diablo franchise in 2021.

In just over 20 years, mobile gaming took control of over 50% of the $165b gaming market — powered by advancements in mobile technology. Today, mobile gaming has become too big to ignore.

Playing our part by spreading the gossip

In such a hit-driven industry, there’s one way to get ahead — acquiring successful game studios. In the past couple years, we’ve seen big acquisitions with Activision buying King (Candy Crush) and Tencent buying a majority stake in Supercell (Clash of Clans).

2020 was no different with the industry in acquisition mode:

• Microsoft acquired game developer ZeniMax, in a blockbuster deal, and was reportedly trying to buy Discord in 2021.
• 2020 became a record year with over 220 gaming companies acquired.

And now, the acquisition rumor mills are spinning again… A May report by CFTN mentioned game developers, Zynga (NASDAQ:ZNGA), Ubisoft (OTC:UBSFY) and Take-Two Interactive (NASDAQ:TTWO), as top buyout candidates. Industry sources say those with less than $15b in market cap are the likely targets.

In recent weeks, a report by Betaville says Zynga received buyout interest — but this is mere chatter.

Investors: Playing the guessing game

Acquisitions are complicated and it often takes hundreds of starter conversations to lead to a deal — with rumors mostly leading to nothing.

Trying to guess which companies get acquired is a tough game to play. You’re better off looking for strong companies — and if something you own gets acquired, consider yourself lucky.