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.