Scientific Games’ social gaming spin-off made its Nasdaq debut Friday with the initial public offering expected to raise more than $404.8 million, well above the initial projections.
SciPlay Corp., which develops free-play mobile casino games, was priced at $16 a share, but shot up as high $18 a share at the market’s opening. More than 17.3 million shares were traded before the day’s closing bell. SciPlay finished at $15.25 per share.
Las Vegas-based Scientific Games told the Securities and Exchange Commission last month that it would issue 22 million shares of its spin-off. The company had hoped to raise $352 million through the IPO. Underwriters will have a 30-day option to purchase an additional 3.3 million shares at the IPO price. Scientific Games said the proceeds from the IPO would be used to pay down debt.
The company said in a statement that the IPO will close Tuesday.
The term social gaming covers free-to-play games that are played on mobile devices or a computer. Customers often pay nominal fees to acquire tokens or chips to increase a virtual bankroll. Last year, Scientific Games’ revenue from social gaming grew to $416.2 million from $361.4 million in 2017.
Some of the free mobile games produced and controlled by SciPlay are “Monopoly Slots” and “Jackpot Party Casino.”
The IPO lock-up period will be 180 days. This is a contractual restriction preventing insiders who acquired shares of a company’s stock before it went public from selling the stock for a stated period of time after it goes public.
Gaming analysts have expressed positive sentiments about the spin-off, which could help Scientific Games’ stock price. The company’s shares closed Friday at $21.82 on the Nasdaq.
“While the absolute implications for the financial profile are relatively minimal, the broader perspective of paying down debt and highlighting the growth within the social business should be a positive for the stock going forward,” Jefferies gaming analyst David Katz said in a Friday morning research note.
Katz said social gaming, along with Scientific Games’ other technology-based businesses, including sports betting, are “the highest valuation aspects of the company.”
Eilers & Krejcik gaming analyst Adam Krejcik told investors in April that most publicly traded video and mobile game companies are trading at 17 times cash flow. He estimated the implied valuation of the SciPlay IPO was almost $2 billion.
Scientific Games has long discussed spinning off the social gaming business.
“For our rapidly growing social business, an IPO would give us greater flexibility to pursue growth for the business and drive value for stakeholders,” Scientific Games CEO Barry Cottle said in November. “We remain focused on delivering for our customers and running our business efficiently and effectively to drive revenue, reduce costs and continue to build momentum across the company.”
According to Seeking Alpha, competitors in the social gaming space include Zynga, DoubleU, and Playtika.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
