Playtika Plunges as Chinese Investor Mulls Massive Share Sale

Posted on: January 24, 2022, 09:24h. 

Last updated on: January 24, 2022, 12:48h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Mobile gaming company Playtika (NASDAQ:PLTK) is tumbling today after it revealed its largest investor is considering selling a portion of its stake in the Israeli company that could be equal to as much as 25 percent of the shares outstanding.

PHUK II
Playtika founder Robert Antokol. The stock is sliding today on news investor PHUK II could reduce its stake. (Image: FlowBank)

In midday trading, Playtika is down 16.16 percent on volume that’s already surpassed the daily average on the news. Off 57 percent from its 52-week high, the stock is probing new lows today as majority investor Playtika Holding UK II Limited (PHUK II) evaluates selling 15 percent to 25 percent of the gaming company’s shares outstanding, which stand at 409.6 million.

PHUK II, which is controlled by affiliates of Yuzhu Shi, intends to explore options with respect to the potential sale of shares of Playtika common stock, which may include by means of private placements, public offerings or other transactions,” according to a statement.

Playtika Holding UK is controlled by Chinese investors Giant Network Group Co. Ltd. and Yunfeng Capital. Yunfeng is a private equity group started by Alibaba founder Jack Ma.

PHUK II Could Be Selling Low

If the investor group proceeds with plans to reduce its stake in Playtika over the near term, it will likely do so at unattractive prices.

The mobile games developer is just over a year removed from an initial public offering (IPO) in which the company raised $1.88 billion, valuing it $11.1 billion. Playtika shares were priced at $27 in that offering and later traded over $35. Today, the stock is struggling to stay above $15.

“The determination to conduct any potential transactions, and the timing thereof, will depend on, among various factors, the price and terms of any potential transaction, general market and economic conditions and the outcome of any negotiations among the applicable parties,” said the company in a statement. “There can be no assurance that the aforementioned explorations of potential transactions will lead to any transactions being agreed or consummated by PHUK II.”

Caesars Entertainment (NASDAQ:CZR) previously controlled Playtika, but the old iteration of the casino giant sold that interest for $4.4 billion in 2016 after filing for Chapter 11 bankruptcy protection in 2015.

Questionable Timing for Playtika Share Sale

News of PHUK II potentially reducing its Playtika stake arrives as market participants are rapidly souring on online casino and sportsbook stocks and as financial markets are readjusting expectations for profitability and total addressable market.

As Playtika’s recent price action confirms, some mobile gaming companies are caught up in that downdraft. Founded in 2010, Playtika is profitable and has ample liquidity — $1.4 billion as of last September.

The company was one of the first to offer free-to-play social games on social networks and mobile devices, has over 35 million monthly users. Its well-known games include Bingo Blitz, Caesars Slots, Slotomania, and World Series of Poker (WSOP) Social.