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Skillz Inc, a Renowned Mobile eSports Company Eyeing Public Debut via SPAC
By Jeff Osienya Sep 06, 2020 IndustryCompetitive mobile game platform provider Skillz Inc has agreed to merge with Flying Eagle Acquisition Corp, the sixth SPAC formed by Jeff Sagansky & Harry Sloan for public listing on the Nasdaq. Skillz will be valued at $3.5 billion upon going public.Skillz Inc., a leading-edge platform provider for mobile casino style and eSports tournaments is setting its sights on a public debut the DraftKings way. On Wednesday, Skillz Inc agreed to a merger deal with Flying Eagle Acquisition Corp (FEAC), a publicly traded special purpose acquisition company (SPAC) to piggyback its way to the New York Stock Exchange. This transaction effectively puts the value of Skillz, the San Francisco-based gaming company at a cool $3.5 billion, which is 15.5 times its expected 2020 revenue of $225 million and 6.3 times its projected 2022 revenue.
With this arrangement, Skillz Inc is going to be the first mobile e-sports platform to become a public company. In H1 2020, the company recorded sales of about $103 million, with an impressive 111% growth in annualized revenue for Q2 2020. As we speak, Skillz employs about 250 staffers and it recorded more than 2.6 million active users by the end of Q2 2020.
For 2020, company also expects to power over 2 billion eSports gaming tournaments and process a whopping $1.6 billion in player entry fees from the games exclusively hosted on its proprietary platform. Additionally, Skillz is looking at a $555 million turnover come 2022, which will be a 57% compounded annual growth rate from 2020’s projected numbers.
Making Hay While the Sun Shines
The gaming space at the moment is red hot and FEAC and Skillz aren’t wasting any time to seize the lucrative opportunity. Currently, over 2.7 billion users are taking part in online games every month, and the customer base is supported by over 10 million developers across the globe. The industry is growing faster than ever thanks to mobile device gaming.
Following the public listing announcement, Skillz even released a statement citing data from renowned research firms GlobalData and Newzoo, indicating that mobile device gaming is the fastest-growing vertical of the gaming industry. By 2025, the gaming market value is expected to hit a remarkable $150 billion, up from $68 billion in 2019.
While you’ll find classic casino-style games such as 21 Blitz and Solitaire Cube where users play and compete against each other, a huge chunk of the games hosted on Skillz platform aren’t all about casino-style gaming. Essentially, the main objective of this robust platform is to seamlessly match users based on their skill so that noobs can only go against fellow newbies and veterans can face off against equally skilled players.
Core Terms in the Fine Print for the Transaction
The Flying Eagle SPAC is led by two veteran Hollywood executives; Harry Sloan the former movie studio chief for MGM holdings, and Jeff Sagansky, a film producer and current CBS entertainment president. The dynamic duo of Hollywood execs, Sloan and Sagansky, are the same pair who founded the Diamond Eagle Acquisition Corp, the SPAC or black check company that sailed DraftKings to public listing through a reverse merger back in April. Besides, Flying Eagle will be the sixth SPAC that the pair has formed.
Sloan is the Chairman and CEO whereas Eli Baker is listed as the President, Chief Financial Officer and Secretary of the Flying Eagle blank check company. As with Sagansky, Baker and Sloan have also previously joined forces to form a SPAC, and Baker was also part of the team that took DraftKings to Nasdaq. Alan Mnuchin (brother to Steven Mnuchin, the current U.S. Treasury Secretary) is the other notable figure who is part of the founding team of the FEAC SPAC.
Cash proceeds estimated from this transaction will consist of $690 million of cash in trust from Flying Eagle itself. Moreover, investors led by Neuberger Berman, Franklin Templeton, Fidelity Management and Research Company LLC, and Wellington Management Company have committed to a $159 million investment in the form of a PIPE (private investment in public equity) priced at $10 for each share of FEAC’s common stock, right before closing the deal.
After the transaction is sealed, the consolidated balance sheet of Nasdaq listed Skillz is expected to have about $250 million in cash and cash equivalents. These proceeds will be used to boost the company’s growth in both local and international markets, provide more working capital and support its marketing ventures.
2020, The Year of SPACS
This announcement comes at a time when venture capital funded technology and gaming companies are increasingly opting to team up with a SPAC for public listing to circumnavigate the traditional IPO strategy which is typically associated with heftier costs and longer waiting periods.
Skillz Inc. will now be the fifth gaming company in the USA to pursue public listing on Nasdaq in 2020. GAN Limited went public in May through the traditional IPO channel whereas Golden Nugget, Rush Street Interactive and the aforementioned DraftKings all used blank check companies on their journey to the Nasdaq. Like Skillz however, Rush Street is yet to make its public debut but the transactions are expected to have completed by the end of the year.
According to an August report by investment company Renaissance Capital, a total of 60 SPACs have been formed so far in 2020, counting non-gaming blank check IPOs as well. These SPACs have raised a record-breaking total of $22.5 billion.
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