Unity Software – IPO
Unity Software (NYSE:U) is a 3D game engine used to create, run, and monetize video games on mobile phones, tablets, PCs, and consoles. Unity is one of the most popular gaming engines and has been used to create 53% of the top 1,000 games on IOS and Android and 50% of all games regardless of the platform. It is the biggest competitor to Epic Games’ Unreal Engine that is currently in a heated legal battle with Apple. As Apple and Epic battle it out, Unity is poised to capitalize and take market share from Unreal. This market share growth is already being priced into the Unity shares within its first week of trading. Unity was offering 25 million shares at $52 with an enterprie value of $13.7 billion. The market was hungry for the Unity debut, especially given how well positioned they were in the face of Apple v. Epic, as its share price ballooned 44% to $75 per share in intraday trading and closed at $68 a share. As of September 24th, Unity now has an enterprise value of $22.2 billion and is trading around $83 per share.
Microsoft Acquires Zenimax (game publisher Bethesda)
Following on the heels of the highly successful Unity IPO, Microsoft announced they were acquiring Zenimax and its game publisher Bethesda Softworks for $7.5 billion in cash, one of the biggest gaming acquisitions in history. Zenimax, headquartered in Washington D.C. and with offices around the globe, is a creator and publisher of video games for PCs and consoles. One of Zenimax’s most successful studios is Bethesda. Bethesda is the creator of critically acclaimed games including The Elder Scrolls and Fallout and has a total of 8 studios, won publisher of the year in 2018, and has won “Game of the Year” five years in a row. With the acquisition, Microsoft will grow from 15 studios to 23 and will be adding the games to its fast-growing Xbox Game Pass subscription. Although transaction terms have not been made public, Microsoft is looking to close the transaction in fall 2021 and the transaction will have minimal impact on non-GAAP operating income in fiscal years 2021 and 2022.
The historic week in gaming continued on September 23rd when Corsair (CRSR) debuted its IPO for $17 per share and is looking to raise $238 million. Corsair is the manufacturer of gaming hardware and accessories marketed to PC gamers and streamers. Corsair was previously publicly listed but was acquired by EagleTree Capital, a private equity firm, in 2017 for $550 million. With more people at home, Corsair has seen a significant boost in its revenue and is on pace to make a profit for the first time since 2017. After its debut on the Nasdaq, the company’s stock declined 16% on its first day of trading and is currently trading at $15.58 per share. Before its IPO, the company had a valuation of $1.3 billion and is now sitting at $1.8 billion. While both Corsair and Unity are in gaming, they are materially different companies, with Corsair much more of a consumer products / hardware company and Unity serving as the engine that drives the future of gaming. This is reflected in their respective stock performance post-IPO.
Vice President & Head of Digital Gaming