Thursday's Headlines: Unity Announces a $4.4bn Merger

Thursday's Headlines: Unity Announces a $4.4bn Merger

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Stitch Fix (SFIX) 13.6%

Nautilus (NLS) 9.0%

Twitter (TWTR) 7.9%

Trip.com Group (TCOM) 6.2%

Huazhu Hotels Group (HTHT) 4.0%

Moving Down ⬇️

Zoom Communications (ZM) -6.5%

Upstart Holdings (UPST) -5.5%

2U (TWOU) -4.8%

Peloton Interactive (PTON) -3.5%

Yext (YEXT) -3.5%

 

Here are the stories that you need to know ahead of market-open today, Thursday, the 14th of July.

 

Unity Announces a $4.4bn Merger ⬇️

Shares of Unity Software plunged close to 20% in trading yesterday after the video game software developer announced that it was merging with ironSource, a platform that helps creators scale mobile apps through user acquisition and monetization.

This all-stock deal — which means that ironSource shareholders will receive Unity stock rather than cash buyouts — values ironSource at approximately $4.4 billion. Considering that the company was valued at around $2.28 billion prior to the deal being announced, this is a hefty premium that Unity is paying for the company, which partially precipitated yesterday’s stock price crash.

ironSource is an Israeli company that went public a year ago on the NYSE through a SPAC (special purpose acquisition company) merger. At the time, the company was valued at $11 billion, but has since shed over 70% of its value due to wider market conditions.

Of course, recent times haven’t been so great for Unity either. Company stock has fallen by close to 85% since November and, recently, it laid-off more than 200 people, which made up circa 4% of its workforce.

While the deal might appear to make sense on the surface, Unity shareholders might not be best-pleased by the dilution of their current holdings. However, management appears to be trying to soften the blow, authorizing a 24-month share buyback program of up to $2.5 billion.

In a statement, Unity CEO John Riccitiello said, “The combination of Unity and ironSource better supports creators of all sizes by giving them all the tools they need to create and grow successful apps in gaming and other consumer-facing verticals like e-commerce.”

 

Spotify Acquires Wordle Copycat 🎵

Spotify announced on Tuesday the acquisition of the Wordle-inspired music game, Heardle, for an undisclosed fee. The move will look to expand Spotify’s interactive efforts as we have seen with recent investments in video and live-streaming.

Heardle is a rather simple, musical version of the wildly popular word game Wordle. Users can log in to have six guesses at the song of the day based on the opening notes. Having just tried it for the first time today as part of my in-depth research for this piece, I can attest it is much more difficult than Wordle (even that time the word was “caulk”!).

Difficulty aside, it is being played by millions of people according to Spotify, who didn’t divulge any further information. Heardle will remain free-to-play on its own standalone website. The only real change will be the option to listen to the full song on Spotify once you’ve completed the challenge. While it is currently available in North America, Ireland, the U.K., Australia, and New Zealand, Spotify has plans to expand this reach in the future.

Spotify’s Global Head of Music Jeremy Erlich has this to say on the deal:

“We are always looking for innovative and playful ways to enhance music discovery and help artists reach new fans. Heardle has proven to be a really fun way to connect millions of fans with songs they know and love and with new songs . . . and a way to compete with their friends as to who has the best musical knowledge. Since its debut, the game has quickly built a loyal following, and it aligns with our plans to deepen interactivity across the Spotify ecosystem.”

 

Polestar On Track To Meet Delivery Targets 🚗

Swedish electric vehicle (EV) manufacturer Polestar confirmed yesterday that it is still expected to meet targets of 50,000 vehicle deliveries in 2022. This comes despite significant production challenges at its Chinese manufacturing facility due to COVID-related lockdowns across the first half of the year.

Polestar has implemented a two-shift system in its factory to ensure that this lost production time is made up. Despite the notable headwinds, the company still delivered over 21,200 vehicles between January and June — up 123% from the same period last year.

Polestar recently went public via SPAC following months of anticipation from investors. The company specializes in high-performance cars and has relatively limited offerings available so far. Its first vehicle — the Polestar 1 — was reportedly only manufactured 1,500 times worldwide. Its current car, the Polestar 2, is the first car of any kind to have an operating system exclusively powered by Google — not the worst ally to have when you’re taking on the might of Elon Musk and Co.

Can Polestar possibly compete with the established players in the EV space?

Well, it certainly has a chance. Polestar is majority-owned by fellow Swedish automaker Volvo who, in turn, is owned by Chinese conglomerate Geely. This gives Polestar a clear footprint in both China and Europe — two huge markets for the burgeoning EV space.

Polestar is better placed than most newcomers to make a dent in the market. A strong presence in both Europe and China, a premium brand, and actively increasing production and sales all point to an increased market share moving forward.

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