Bits of Signum 6.5.2020
Peaceful protests, IPO window, China IPO window, Facebook Libra, Zynga/Peak Games
Happy Friday and may the peaceful protests continue…
NOTE: the IGN Summer of Gaming was postponed to kick off on June 8th - putting Mythical Games Blankos on your radar :)
The IPO window is OPEN as of this week with Warner Music Group(WMG) +28% and Zoom Info (ZI) +62% on their first days of trading. There are separately some interesting capital markets winds blowing between the US, China and Nasdaq. While the drumbeat against Chinese Internet companies on US exchanges continues from Washington, investors want more of the one deal, Dada Nexus, that is currently listing on the NASDAQ. Are free markets telling us something? What is happening...
In April, SEC Chief Jay Clayton warned investors against putting money into Chinese companies due to ongoing problems with those companies’ disclosures.
In May, Nasdaq responded by tightening listing rules on IPOs of Chinese companies closely held by insiders and with opaque accounting.
Yesterday, U.S. Secretary of State Mike Pompeo warned American investors against fraudulent accounting practices at China-based companies and said that other exchanges should follow Nasdaq.
Also this week, it was reported that Netease (Chinese gaming/social) is proactively leaving before they are kicked out. Even though they are listed on Nasdaq, they are raising $3 billion in Hong Kong. For context, they run many successful games in China and have a partnership with Blizzard to operate games like World of Warcraft in China.
Meanwhile, does anyone find it ironic that Chinese NASDAQ IPO Dada Nexus (backed by JD.com and Walmart) is reported to be UPSIZING their deal by >25% based on investor demand?!
Dealogic -> Chinese co’s that have listed in the US in 2020 are down 23% so performance is worth watching.
Below we noted the two companies that are on their way back to China and the one (Dada Nexus) that is on its way to the US.
Facebook Libra / India: The news yesterday that Amazon is considering investing $2 Billion (~5% stake) in #3 Wireless provider Bharti Airtel (~330m subs) is interesting because it relates to earlier comments regarding Facebook’s $5.7 billion investment in Reliance Jio (~10% stake), the platform that includes the #1 telecom operator Jio (~380m subs). Separately, Facebook has said that only 1 million WhatsApp users in India have access to the payment functionality. I had a very interesting conversation with Seth Ginns of CoinFund who raised the idea that Libra could be well-positioned to be the government sanctioned digital payments backend. This makes a lot of sense to me. Having said that, the service launched on April 26th and there are reports of a rocky start. Still, we have now seen the FANGs, Walmart, and others enter the race for the Indian online retail consumer and only Facebook has WhatsApp, the #1 communications platform.
Thanks and have a great weekend!
Angie
Angela Dalton | LinkedIn | Twitter | Email
Digital Assets
Max Fiege | LinkedIn | Twitter | Email
HEADLINES
Amended lawsuit filed against Bitfinex and Tether, drawing in Poloniex and Bittrex
Claims notable cryptocurrency exchanges accepted debased USDT to pump asset prices during the 2017 asset class peak
Case remains worth following as the Overton window on Tether increasingly shifts to acceptance, with Kraken and Coinbase Custody recently rolling out support for USDT tokenized on Ethereum
Hester Peirce nominated to retain her commissioner role at the SEC
Requires confirmation by the Senate, which is in session until July 3rd but will be pressed with concerns surrounding COVID-19 and the George Floyd protests
SEC has not yet signaled whether Peirce’s safe harbor for cryptocurrency startups would find its way into regulatory reality
Disruptive Entertainment
Nik Vantzos | LinkedIn | Email
HEADLINES
Zynga is acquiring Peak Games (Turkish mobile games developer) for $1.8B
See Medium post on Peak Games’ unusual rise to success in casual games, with the company’s Toon Blast evolving into a top-3 game in the world, by retention
Peak Games’ biggest titles, puzzle games Toon Blast and Toy Blast, have together more than 12M DAUs and are top-10 and 20 games in the app store the last 2 years
Exiting investors include Earlybird, Hummingbird Ventures, and Endeavor Global
The company had raised $25M in the last 10 years, the vast majority was in the early days, and the company effectively skipped later funding rounds
Zynga also acquired Peak Games’ mobile card game studio in 2017 for $100M
The acquisition is expected to increase Zynga’s global audience by 60% (makes sense considering Peak Games’ disparate geography), this will be great for Zynga’s ad network
Zynga stock was up 5% in pre-market trading upon release of the acquisition news
There’s a lot of interesting takeaways here. For one, the acquisition puts on display traditional tech/gaming buyers’ expanding reach into new geographies that are coming out with high quality teams and products (in this case, Turkey). Two, Peak Games is a really interesting case study and success story around its raise strategy. Traditionally, the Company’s lack of raises post-Series B would raise eyebrows negatively, but rather the company ended up finding mass success without continuing the traditional (raise/burn) capital path. Its success is another testament to today’s rhetoric around doing larger raises earlier (e.g. large Series A), with longer periods between fundings, enabling companies to focus on their business - growth and operational excellence. Peak Games was able to do just that (over a long time horizon) - focus on building and optimizing its products… to a now “unicorn” exit result.
M&A and Raises
Digital Assets
Chipmaker SMIC raises $2.8B with IPO on the Shanghai Stock Exchange
SMIC is China’s largest chipmaker, but remains a distant third behind TSMC and Samsung as its leading chip designs don’t go below 14nm. This IPO sits squarely within the context of ongoing US-China trade disputes, as both TSMC and Samsung could be forced to decide between the two markets should tensions escalate. In regards to digital assets, TSMC supplies all Chinese ASIC manufacturers; the rise of SMIC is required for China to remain competitive in bitcoin mining over the medium-term, should TSMC find itself barred from engaging in the Chinese market.
Avanti raises $5M as it looks to receive a Wyoming bank charter
Numerai raises $3M in token sale led by USV and Placeholder Ventures
Square grants $100k to Eye of Satoshi lightning network project
Amazon Eyes $2 Billion Stake in Bharti Airtel: Report
Disruptive Entertainment
Kippo, an LA dating & social app for gamers, raised $2M in Seed funding, led by Primer Sazze Partners
Playrix is acquiring Croatian PC developer Cateia Games, and will rebrand it to Playrix Croatia
Warner Music Group priced its IPO Wednesday, raising $1.9B (77M shares at $25 per share), and sees big gains in early trading days
DoubleDown Interactive, a South Korean developer of mobile & web games, filed for a ~$100M IPO. It had revenue of $273.6M and income of $36.3M in 2019
Playtika, an Israel mobile games studio, is preparing for a U.S. IPO that could raise ~$1B. The company is currently owned by Chinese investors: Giant Network Group and Yunfeng Capital
TPG is in talks to acquire Goal.com, the world’s largest soccer news website, from DAZN Group for $125M
PickUp, a NY platform for embedding interactive sports content into editorial articles, raised $1.5M seed funding, led by KB Partners
LootLocker (Swedish gaming tech services startup) raised a $250K seed round
Signum Growth Capital Team
Angela Dalton | Founder and CEO | angela@signumgrowthcapital.com
Max Fiege | Director, Digital Assets | max@signumgrowthcapital.com
Nik Vantzos | Director, Disruptive Entertainment | nik@signumgrowthcapital.com