Scientific Games seeks to raise $352 million through social games IPO Howard Stutz, CDC Gaming Reports · April 22, 2019 at 3:28 pm Scientific Games announced Monday that it hopes to raise as much $352 million through its initial public offering for the company’s social gaming business. In a filing with the Securities and Exchange Commission, the Las Vegas-based gaming equipment provider said it plans to offer 22 million shares in SciPlay Corp at between $14 and $16 a share. The company, a spin-off from Scientific Games, will be traded on the Nasdaq. Underwriters will have a 30-day option to purchase an additional 3.3 million shares at the IPO price. Scientific Games said the proceeds from the IPO would be used to pay down debt. Social gaming is considered to be free-to-play games played on mobile devices or a computer. Customers often pay nominal fees to acquire “tokens” or “chips” to increase a virtual bankroll. Last year, Scientific Games’ revenue from social gaming grew to $416.2 million from $361.4 million in 2017. In the fourth quarter, Scientific Games said its revenue from social gaming grew 19 percent to $113.7 million. In the SEC filing, the company said its estimated revenue from social gaming in the first quarter that ended March 31 would range between $117 million and $119 million. Revenue in the first quarter of 2018 was $97.5 million. No date to report first quarter results has been announced. In a note to investors, Jefferies Gaming analyst David Katz said he was encouraged by several developments at Scientific Games that have moved the company’s share price higher. “We view the proposed IPO of Scientific Games’ social unit as an incremental positive in terms of capturing value and incrementally reducing the leverage profile of the overall business, although it does improve optics towards capital allocation and commitment towards de-risking the stock,” Katz said. “We expect continued scrutiny surrounding the capital position to drive the near-term stock performance rather than the results.” Eilers & Krejcik gaming analyst Adam Krejcik told investors most publicly traded video and mobile game companies are trading at 17 times cash flow. He estimated the implied valuation of the SciPlay IPO was almost $2 billion. Last week, Scientific Games and Wynn Resorts announced a partnership agreement in which the casino operator will launch online sports betting and Internet gaming in New Jersey. In doing so, Wynn Resorts intends to utilize several of Scientific Games’ products and services. The company has long discussed spinning off the social gaming business. “For our rapidly growing social business, an IPO would give us greater flexibility to pursue growth for the business and drive value for stakeholders,” Scientific Games CEO Barry Cottle said in November. “We remain focused on delivering for our customers and running our business efficiently and effectively to drive revenue, reduce costs and continue to build momentum across the company.” According to Seeking Alpha, competitors in the social gaming space include Zynga, DoubleU, and Playtika. Shares of Scientific Games closed at $22.76 on the Nasdaq Monday, up 8 cents or 0.35 percent. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.