Unity Software Raises IPO Price Following Other Successful Debuts

Video game creation company Unity Software (NYSE: U) is pricing its IPO at $52 a share, another increase a day after upping the price range from the original $34 to $42 range. The company -- which took direct control of pricing and placement of shares instead of allowing its banking underwriters to do the job -- will raise as much as $1.35 billion in cash as a result. And with over 263 million shares outstanding, the price values the company at a market cap of $13.7 billion.  

Someone sitting in a living room playing video games on a TV.

Image source: Getty Images.

A big week for cloud computing

Unity's public-market debut today and strong early interest come on the heels of a busy week that featured IPOs for cloud software firms Snowflake, JFrog, and Sumo Logic, all of which surged double-digit percentages from their initial pricing. Unity plans on using the proceeds from its IPO for general operational purposes, to pay off $125 million in loans, and possibly make acquisitions to round out its offering for game developers.

Revenue in 2019 was $542 million, a 42% year-over-year increase. And through the first half of 2020, revenue increased 39% to $351 million. The global video game industry has experienced steady growth over the years and has been an entertainment staple during the pandemic with game sales up 37% in August 2020. Unity itself isn't a game publisher or developer. It operates a platform to simplify the creation and distribution process for video game makers, bringing it into competition with Fortnite developer and Unreal Engine game platform Epic Games, which is backed by Chinese tech giant Tencent. Unity boasts having over 1.5 million developers using its wares, making it the largest such platform of its kind.

Though at $52 per share it would carry a high price tag of some 20 times trailing-12-month revenue, this cloud-based software platform will be worth watching.

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Nicholas Rossolillo owns shares of Tencent Holdings. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Tencent Holdings. The Motley Fool recommends Snowflake Inc. The Motley Fool has a disclosure policy.

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