Posted: Jun 2, 2021, 10:19 a.m.
Last update on: June 2, 2021, 11:11 a.m.
Embbattled Skillz (NYSE: SKLZ) stock is up Wednesday after the mobile gaming platform provider announced it was buying online advertising company Aarki for $ 150 million, forming the first point of integrated sale of esport advertising.
The cash and equity deal is expected to be finalized in the third quarter. It is common for acquiring companies to decline acquisition news, especially if equity is part of the deal. However, Skillz action is over 32% higher to date, easily making it one of the best performing gaming actions today. The name is on track for its highest close since mid-April.
The highly complementary acquisition will expand Skillz’s presence in the growing mobile gaming industry by combining its competitive platform with Aarki’s advanced advertising capabilities, ”according to a statement from San Francisco-based Skillz.
Private company Aarki, which is also headquartered in the California Bay Area, will function as a division of Skillz upon closing of the transaction.
Why Deal News is moving Skillz Stock
Today’s movement is definitely helping. But Skillz is still working 55% below its February highs and has been under pressure for several months after three bearish reports – two of which were released by unidentified sources – criticized the title.
Some of the allegations made against Skillz by bearish researchers are that the mobile game company is indulging in accounting tricks, that its cash income may be lower than investors realize, and the costs of acquiring customers. are too high.
Aarki could allay some of these concerns as the platform reaches 465 million monthly users, which could boost Skillz’s customer acquisition capabilities. Additionally, the company’s technological capabilities could improve Skillz’s relationships with advertisers, potentially increasing the operator’s revenue.
“Aarki engages in more than five trillion monthly advertising auctions,” the statement said. “The company leverages its robust creative services, rich data engines and proprietary machine learning algorithms to deliver leading ROI for successful advertisers. “
It remains to be seen exactly how the Aarki deal plays out for Skillz and the buyer’s shareholders. The aforementioned statement announcing the purchase does not mention details of the purchase that increases income or increases income.
However, it can serve another purpose. If Skillz action can build on today’s momentum, bearish traders may be forced to leave the name. As of May 14, 73.18 million shares of the games company have been sold short, representing 30.88% of the company’s total free float, according to data from Dow Jones.
As has been widely noted, Skillz has the backing of some well-known growth investors. If they see credible value in the Aarki deal and say so publicly, it could push stocks up, which could put pressure on short sellers.