Unity x IronSource | #17
Unity and IronSource merge and here are my thoughts on it
Today we are going to talk about the Unity and IronSource merger. Before I give my thoughts on the merger, I have an announcement to make.
Buy The Dip competition
“Buy the Dip” competition is a stock pitching competition by Commonstock where you pitch the stock idea that you think will be the best buy during the next 12 months. If you want to participate feel free to post your stock idea here. If you participate, do let me know, and I’ll give you an upvote.
Talking about pitching, I am pitching VOO 0.00%↑ as my choice of stock. If you are in common stock, feel free to read it and let me know your thoughts in the comments.
My stock pitch: Beating the market with $VOO 👀
Unity x IronSource
U 0.00%↑ and IS 0.00%↑ have reached an agreement to merge. The merge is an all-stock deal valuing IS 0.00%↑ over $4.4B - a premium of over 75%. Part of the transaction will also involve Silver Lake and Sequoia, the two largest Unity shareholders, investing $1 billion in Unity in the form of convertible notes after the transaction closes.
Unity is a 3D interactive content creation platform. IS is primarily an ad-tech company. The merger will mean Unity now can provide a complete solution from development, analytics, monetization, advertisement, and publishing service to its customers.
I am invested in both Unity and IS, here are my thoughts on them:
😍 Things I like
This will certainly ensure Unity reaches cash flower positive sooner (which John promised after the Q1 report).
Data, data, data: IS has data from more diverse points than Unity - which of course helps. Unity on other hand has data from 75% of mobile gaming customers, which helps IS. Combined together it will help their operate sector with better accuracy. (No personal identifiers will be required because most games will be advertised in their network)
I like APP better than IS, but with merging they can compete and increase their market share against like likes of $APP, $APPS, Vungle, and Liftoff.
Publishing arm - Supersonic: Initially, I would have thought it would be competing with their customer itself. But, after listening to John about vision with Supersonic, it fits the puzzle. It becomes a complete solution.
🤮 I didn't like:
Dilution - I think the price paid for IS was at a premium, and it hurts to see my shares get diluted by 30%
More dilution - Although it's good to see its biggest investors Sequoia and Silver Lake's support via $1B debt, it's more dilution for investors.
IS's history - Although, IS is a reputable company now, during the PC era they were infamous for an installer package with malware. They have changed so much now, but it's a kind of meh for me to be attached to my biggest holdings.
Buyback? - While buyback sounds sexy and would help cancel off some dilution, but still, the entire deal seems confusing.
Innovation - It might hamper the innovation that U could have made.
Overall I think it will be good for Unity in long term and I will be holding the stock. If any narrative is changed or actions towards the narrative are changed in upcoming quarters, I will consider cutting ties with Unity.