Social casino developer Playstudios (NASDAQ:MYPS) became a publicly traded entity following a merger with a special purpose acquisition company (SPAC) and it’s one of the worst-performing members of an expansive group that opted to go public that way.
Playstudios became a freestanding public company in June after a merger with Acies Acquisition, a blank-check firm started by former MGM Resorts International (NYSE:MGM) CEO Jim Murren. Shares of the gaming company have been more than cut in half since June 21, the first day of trading, but it’s far from the only de-SPACed offender.
Out of the 107 companies that completed their SPAC mergers to date in 2021, only 24 percent (26) are trading above their $10 IPO price,” according to SPAC Track.
When Murren’s Acies and Playstudios announced the merger agreement in February, the gaming company was valued at $1.1 billion, or a tolerable 2.5x 2022 estimated revenue of $435 million, and came to market with $220 million in cash. Today, it’s market capitalization is just $580.55 million.
Playstudios Far From Lone de-SPAC Offender
When blank-check companies, such as Acies, go public, it’s usually at a price of $10 per share. Typically, the share price jumps when the SPAC announces a deal and from there, the stock becomes a proxy for the acquired company.
Using $10 as the benchmark, Playstudios is one of the worst-performing de-SPACed stocks over the past year, having shed nearly 60 percent. The stock is down almost 70 percent from its February high, reached following the merger announcement.
However, Playstudios isn’t alone among post-SPAC offenders. A variety of gaming companies that went public via blank-check transactions are slumping and five other firmss across multiple industries experienced worse de-SPAC share declines than Playstudios.
Market observers and blank-check experts say those declines are mostly attributable to poor underlying fundamentals and some de-SPACed companies being pre-revenue firms. Playstudios has revenue, though its second-quarter sales dipped $7.1 million year-over-year while the company posted negative net income after being positive on that basis a year earlier.
Data confirm post-SPAC performance is waning across the board.
“Since the IPOX SPAC Index peaked on Feb. 17, it has lost over 25 percent of its value while the Russell 2000 Index is down around -2 percent,” says Cameron McVie of Russell Investments.
Companies born out of blank-check transactions, regardless of industry, generated massive amounts of hype among retail investors, stoking fears of a bubble.
“We also have experienced a period of plenty of speculative buying across the financial markets, such as retail investors investing in meme-mania stocks via platforms such as Robinhood that have driven some wild stock price gyrations,” adds McVie. “The SPAC market provided another avenue for speculative money to find the next unicorn company. Notably, BofA Research identified that retail investors in the SPAC universe accounted for twice the trading volume, compared to the S&P 500 and Russell 2000 stocks, during the second half of 2020.”
Specific to Playstudios, it operates in a fast-growing segment analysts and investors are enthusiastic about. Additionally, it’s business model, including its loyalty program — playAwards — and partnership with MGM Resorts is viable. Its clientele are also devoted with 4.2 million monthly average users playing close to an hour per day.
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