How to Invest in Epic Games

SmartAsset: How to invest in Epic Games

Epic Games is the creator of Fortnite, one of the most popular computer games in the world. The exact numbers for Epic and its flagship product are hard to come by because the company rarely releases them. As a private company, it doesn't have to. However, industry news sites estimate that Fortnite had approximately 400 million registered users in 2021. That's more than 3.1 million players actively in-game when this article was written. We will review Epic Games and how you can invest.

Do you have questions about how to build your own investment portfolio? Speak with a financial advisor.

Epic Games Market Overview

Epic Games has logged some of the largest active player counts of any game online, pulling in more than 78 million people at the same time on the day that Fortnite came out for the Nintendo Switch.

That kind of player base can mean real money. While investors have always had their eye on the North Carolina-based company, their interest really peaked when Epic sued Apple for alleged antitrust violations. Epic has always been a well-known success story, but court documents revealed annual earnings of $4 billion to $5 billion. That, combined with a series of 2022 investments, puts the company at a roughly $32 billion valuation.

That's excellent for any company, but it's particularly good for the volatile video game industry.

However, the problem for investors is that Epic Games has never gone to an initial public offering (IPO). This is a privately traded company, so you can't go out and buy their stock. That doesn't mean you can't make any money from their success. But it'll be harder.

What Are Epic's Products?

Epic Games was founded in 1991 and has steadily released and published games for both consoles and PCs ever since. It has been known primarily for three franchises:

  • Unreal – A series of first-person shooter games popular in the late 1990s and early 2000s
  • Gears of War – A series of third-person shooter games primarily popular in the late 2000s and mid-2010s (later sold to Microsoft)
  • Fortnite – A third-person battler series released in 2017 and popular to this day

All of these products have remained profitable for Epic Games since their release.

The Unreal franchise has, at the time of writing, largely petered out in terms of title releases. Epic hasn't released any new Unreal games since 2014 and recently shut down servers for an Unreal game tournament.

Technology Behind Epic Games

SmartAsset: How to invest in Epic Games

The technology behind these games, known as the Unreal Engine, has become an extremely popular toolset for making games. Epic continues to release and license new versions of the Unreal Engine, which remains one of the most widely used tools in the industry.

The Gears of War franchise has been a bestselling series of console games since the first title's release in 2006. It has spawned numerous sequels with the most recent, Gears Tactics, coming out in 2020 and selling well. At the time of writing, a Gears of War movie was in development with Netflix.

Finally, the Fortnite franchise is a free-to-play battler title. The headline title of the series is Fortnite: Battle Royale, a game in which 100 players simultaneously fight for control of territory. Free to play, Fortnite makes its money through microtransactions.

Players can buy in-game assets like outfits and designs for their characters. They can also buy "Battle Passes," which unlock short-term content like maps and seasonal events. These battle passes to make up the majority of Fortnite's revenue.

Together, these three franchises have made Epic one of the most prominent companies in the video game industry.

How Can You Invest In Epic?

You cannot directly invest in Epic Games. The company is not publicly traded, so it can only be owned by accredited and institutional investors. Even if you qualify to trade private stock, you need to find another shareholder willing to sell. That is technically possible since Epic Games does have private shares owned by investors. However, unless you are an institutional investor with millions to spend, it's unlikely you'll get access to those shares.

More to the point, almost all Epic Games are held by two entities. One is founder Tim Sweeney who, at the time of writing, continued to hold more than 50% of the company. The other is Chinese video game company TenCent, which holds 40% of Epic Games.

This means that you can side-invest in Epic Games by purchasing shares of TenCent (TCEHY). This stock is sold over-the-counter, which means that access will be limited. You may need a personal broker to access this stock. Your relationship with Epic will also be fairly tenuous. While Epic Games is a successful studio, TenCent is one of the largest game companies in the world. The profits from Epic Games will affect it, but only to a degree.

How to Side-Invest in Epic Games

You can side-invest in Epic Games by investing in the esports market in general. Fortnite is one of the most popular esports in the world, and the UnReal Engine is used in many popular games. As a result, investing in this market overall can give you some exposure to Epic Games' success. Arguably the best way to do this is through exchange-traded funds (ETFs) such as the VanEck Video Gaming and eSports ETF or the Global X Video Games and eSports ETF. (Readers should note: These ETFs are noted only as representative examples. They are not to be taken as specific recommendations.)

Until and unless Epic Games decides to issue an IPO, side investment is the only way that retail investors can invest in this company. Doing so through either a significant shareholder or an investment in the industry overall is a good way to do so.

Bottom Line

SmartAsset: How to invest in Epic Games

Epic Games makes one of the most successful tools for video game design, as well as one of the most popular games on the market. The gaming company is still able to attract consumers despite some of its games being shut down like the Unreal franchise and a game like Gears of Ware being sold to Microsoft. They don't sell a public stock, though, so investing will not be easy.

Tips for Investing
  • Whenever you're considering investing in any stock, especially an IPO, it's important to get professional advice. A financial advisor can analyze an investment and decide if it fits in with the financial goals you want. If you don't have a financial advisor, finding one doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
  • When you want to see how investing in an asset could impact your portfolio, try using our free asset allocation calculator.

Photo credit: ©iStock.com/zeljkosantrac, ©iStock.com imaginima, ©iStock.com/fpphotobank

The post How to Invest in Epic Games appeared first on SmartAsset Blog.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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