AppLovin Inc., which is trying to grab a sizable share of a $200 billion mobile apps market, was valued at around $29 billion during the app software company’s initial public offering at the price $80 per share.
The price early Thursday was in the middle of the expected price range for its shares of $75 to $85 each. APPLOVINE
offered 22.5 million shares in the IPO to raise $1.8 billion, and KKR shareholder Denali Holdings LP offered 2.5 million shares to raise $200 million.
With nearly 360 million shares outstanding, the price values the company at around $28.6 billion.
The stock is expected to begin trading Thursday on the Nasdaq under the symbol “APP”.
The Palo Alto, California-based company, which turns 10 in July, makes marketing, monetization and analytics software that helps app developers grow their businesses. It also has a portfolio of over 200 free mobile games with in-app purchases. AppLovin’s expected valuation dwarfs that of a recent comparable IPO, Unity Software Inc. U,
which was valued at nearly $14 billion at the time of its IPO in September.
See also: 5 things to know about Unity Software’s IPO
In its filing with the Securities and Exchange Commission, AppLovin said it sees a total market opportunity of approximately $189 billion, including $101 billion in in-app advertising revenue and approximately $88 billion in direct spending in the world, citing 2020 IDC figures. AppLovin expects this market opportunity to grow to $283 billion by 2024.
Here are five things to know about AppLovin.
The cost of doing business has more than doubled, and Apple and Google are a reason
AppLovin said it had revenue of $1.45 billion in 2020, resulting in a loss of $125.9 million, compared to revenue of $994.1 million in 2019 and net profit of $119 million. In 2018, the company posted revenue of $483.4 million for a loss of $260 million.
The big cost jump in 2020 compared to 2019 was a 130% increase in cost of business expenses to $555.6 million, including $112 million due to payment processing fees. These payment processing fees are the same type that Epic Games balked at paying Apple Inc.’s AAPL.
Alphabet Inc.’s App Store and GOOG
GOOGL
Google Play Store, which reached 30% of purchases.
“The mobile app ecosystem depends in part on a relatively small number of third-party delivery platforms, such as the Apple App Store, Google Play Store, and Facebook, some of which are direct competitors,” AppLovin said. in its S-1. “We derive significant revenue from the distribution of our applications through these third-party platforms and nearly all of our [in-app purchases] are made through the payment processing systems of these third-party platforms.
Nearly a quarter of profits will go to debt repayment
AppLovin estimates that it should net around $1.74 billion if it hits the middle of its range.
Of that amount, the company said it plans to use about $400 million to repay debt under its revolving credit facility. Currently, AppLovin lists $1.6 billion in debt.
“In addition, we plan to use a portion of the net proceeds to complete strategic acquisitions and partnerships,” AppLovin said. “However, other than our pending acquisition of Adjust, we have no definitive agreements or commitments for any material acquisitions or partnerships at this time.”
Acquisitions are part of its growth strategy
More recently, AppLovin announced its intention to acquire German mobile app measurement and marketing company Adjust. Although AppLovin did not disclose the terms of the deal, Crunchbase pegged the price at $1 billion.
The company said in its S-1 that it had “invested more than $1 billion in 15 strategic acquisitions and partnerships” since the start of 2018.
AppLovin acquired mobile game developer Machine Zone Inc. last May for an undisclosed amount, although Crunchbase valued the deal at $500 million.
This follows the acquisitions of SDK management platform SafeDK in 2019, in-app header auction company Max Inc. in 2018, and Germany-based mobile ad network Moqoqo in 2014.
“We will continue to explore and evaluate additional acquisitions, some of which may be of the same size or even greater in investment and capital expenditure than the Machine Zone acquisition and our ongoing Adjust acquisition. “, said the company.
KKR has the lion’s share of vote control
The company plans to offer Class A shares in the IPO, which carry one vote, while early investors Class B shares will carry 20 votes. AppLovin has raised $1.4 billion in funding from investors, according to Crunchbase.
At the controls, KKR Denali Holdings, which will hold 72.4% of the class B shares after the offer, for 67.4% of the voting rights. Other Class B shareholders include Applovin chief executive and co-founder Adam Foroughi, who will own 19.4% of Class B shares with 18.1% voting rights, and CFO Herald Chen, with 3. 2% of class B shares and 3% of voting rights.
The company will also establish a class of non-voting shares, although such shares do not yet exist.
The attempt to sell to a Chinese company failed and KKR intervened
If it weren’t for the US concerns over investments in strategic assets from China, KKR might never have been involved and AppLovin wouldn’t have gone public.
In September 2016, AppLovin agreed to be acquired by Chinese private equity firm Orient Hontai Capital for $1.4 billion. Just over a year later, that deal was scrapped — reportedly after the U.S. Foreign Investment Committee pushed the deal back due to customer data issues — and AppLovin agreed to take an investment of $841 million from Orient Hontai. Prior to this deal, Orient Hontai had invested $140 million in the company; Currently, Orient Hontai owns 26.2 million Class A shares.
In July 2018, KKR & Co. invested $400 million for a minority stake in AppLovin of approximately 110 million shares. At the suggested IPO price, that $400 million investment would be worth more than $8 billion.
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