Playtika Stock Surges After Strategic Review Announced, Sale Possible

Posted on: February 24, 2022, 03:19h. 

Last updated on: February 24, 2022, 03:46h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Playtika (NASDAQ:PLTK) are soaring in Thursday’s after-hours trading session. That’s after the mobile gaming company said it’s considering strategic alternatives, including a possible sale.

Playtika
A billboard advertising Playtika. The stock is soaring after the company announced a review that could include a sale. (Image: Haaretz.com)

The Israeli firm adds it’s commencing a process “to evaluate Playtika’s potential strategic alternatives to maximize value for stockholders. The news comes as the shares surged nearly 16% over the past month. At this writing, Playtika stock is up 17.43%  in after-hours trading, building on a 4.77% gain notched during standard market hours.

As part of the process, the board intends to consider a full range of strategic alternatives, which could include a sale of the company or other possible transactions,” according to a statement issued by the company.

News of the gaming company mulling alternatives arrives about 13 months after its initial public offering (IPO), which was one of the gaming industry’s largest in 2021. On its first day of trading, Playtika stock reached $36, but it now resides 44.22% below the 52-week high.

Another Change in Ownership Possible for Playtika

Should Playtika opt for a sale, it would mark another change in ownership for the gaming company.

The firm was founded in 2010 and was acquired by Caesars Entertainment (NASDAQ:CZR) the following year. Facing a neeed for cash, the casino operator parted with the mobile games company in 2016, selling it a group of Chinese investors for $4.4 billion. Today, that group — Playtika Holding UK II Limited (PHUK II) — is the company’s largest shareholder.

However, the stock tumbled last month on reports that PHUK II is mulling selling a portion of its stake equivalent to up to 25% of Playtika’s shares outstanding. In noting that it doesn’t have a set time line for the review, the gaming company didn’t mention PHUK’s involvement, if any, in the process. Nor did it mention potential suitors.

“There can be no assurance that the exploration of strategic alternatives will result in any transaction or any strategic change or outcome,” according to the statement.

Good Way to Burn Shorts

When companies announce they’re evaluating strategic alternatives, it’s usually good for a bump in the stock, as Playtika’s price action is confirming today.

Specific to the mobile games developer, it could be making life very uncomfortable for traders that are short the stock — a situation that would likely be amplified if the company ultimately sells itself. Should that scenario materialize, short sellers could be compelled to cover those bearish bets, forcing Playtika stock higher in the process.

Earlier this month, Grizzly Research issued a report in which it said there’s potential for “over 40 percent downside in the stock in the short to medium term,” citing a lack of cash and mounting debt. However, Playtika is higher by almost 20% since the report was published.