Mobile games developer Skillz Inc. (NYSE:SKLZ) is making a $50 million investment in Exit Games. It’s a move aimed at bolstering the former’s multiplayer gaming technology platform.
Germany-based Exit Games provides developers with the tools they need to create and host real-time synchronous multiplayer games — a growing segment of the booming esports space. The company has nearly 600,000 developer partners around the world.
Skillz’s investment in Exit Games will give the Company permanent access to Exit’s technology to power its esports tournaments and platform exclusively,” according to a statement.
The bulk of the games featured on Skillz aren’t traditional casino fare, such as blackjack, craps, or poker. One of the aims of the platform is to match users based on proficiency so that rookies only play other new players and experts square off against other highly skilled competitors.
Potentially Shrewd Move for Skillz
While San Francisco-based Skillz isn’t a casino company or a sportsbook operator, some of its competitions allow players to put up their own cash and bet on outcomes. With esports wagering already growing and seen flourishing in the years ahead, the investment in Exit Games could prove prescient.
With more than 2.7 billion gamers playing monthly and 10 million developers around the world, the industry is now larger than some traditional entertainment forms, including books, movies, and music, and mobile gaming is driving that growth.
Since going public late last year, Skillz has been under pressure from some investors to grow its user base and garner more of those players’ gaming-related spending. The Exit Games investment could help with those objectives.
“Expanding into these new areas will grow our total universe of players and allow us to capture an even greater share of their leisure time and spend,” said Skillz CEO Andrew Paradise in the statement.
Move Could Pay Dividends for Skillz
The statement doesn’t say if Skillz paid cash or used equity for the $50 million stake in Exit Games. Shares of mobile games company plunged 35.17 percent last month, bringing its year-to-date loss to nearly 30 percent.
However, the company is making moves to allay investor concerns and expand its revenue streams. In June, Skillz announced the $150 million acquisition of online advertising firm Aarki. At that time, that transaction was widely lauded by analysts and investors. The reaction to the Exit Games investment is more muted with Skillz stock trading higher by about one percent today.
Wells Fargo analyst Brian Fitzgerald recently reiterated an “equal weight” rating on Skillz stock with a price target of $18.50, implying upside of 31 percent from current levels. He’s bullish on the recent addition of former Airbnb executive Ian Lee as Skillz chief financial officer.
The hire is a sign of “stable leadership, a dedicated investor relations function, and further disclosures of more key performance indicators (KPIs) could help raise interest among new investors with a long bias,” said the analyst.
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