Gaming acquisitions continue with Joffre Capital taking a major stake in Playtika

Private equity firm Joffre Capital is buying a 20% stake in Playtika (NASDAQ:PLTK) — an Israeli mobile gaming company — from a Chinese investment group.

What’s the big deal? The purchase price was at a 46% premium compared to Playtika’s previous day’s closing price. But why pay such a big premium?

• It’s unlikely Joffre could buy all the shares it wants on the open market — as this would drive up the price.
• For them to pay such a price implies that Joffre thinks Playtika is trading at a discount.

The market seems to disagree as Playtika fell after the announcement — closing 37% below the purchase price yesterday.

Playtika makes casual and “social casino” games like Slotomania and World Series of Poker — relying on in-game purchases, and a recession will likely impact spending on its platform.

We did some digging into Playtika, and here are some high-level notes:

• Comfortably earning $356M in net income from $2.6M of sales in the past 12 months.
• Sizeable amount of debt on its balance sheet ($2.4B) with $1.1B in cash and short-term investments.

Playtika missed their latest earnings report, and growth has slowed since COVID gave them a major boost.

But gaming is trending… Mobile is the fastest-growing part of the gaming industry, and large gaming companies are bulking up their gaming businesses.

• Take-Two buying Zynga (2022), Sony buying Bungie (2022) and Microsoft buying Activision Blizzard (2021).
• A decline in gaming stocks also makes them more attractive to potential acquirers.

$PLTK will remain on the NASDAQ after the purchase.