Whoever said you can\u2019t make money playing video games clearly hasn\u2019t taken a look at Unity Software\u2019s stock price.
\nOn its first official day of trading, the company rose more than 31%, opening at $75 per share before closing the day at $68.35. Unity\u2019s share price gains came after last night\u2019s pricing of the company\u2019s stock at $52 per share, well above the range of $44 to $48 which was itself an upward revision of the company\u2019s initial target.
\nGames like \u201cPok\u00e9mon GO\u201d and \u201cIron Man VR\u201d rely on the company\u2019s software, as do untold numbers of other mobile gaming applications that use the company\u2019s toolkit for support. The company\u2019s customers range from small gaming publishers to large gaming giants like Electronic Arts, Niantic, Ubisoft and Tencent.<\/p>\n
Unity\u2019s IPO comes on the heels of other well-received debuts, including Sumo Logic, Snowflake and JFrog .
\nTechCrunch caught up with Unity\u2019s CFO, Kim Jabal, after-hours today to dig in a bit on the transaction.
\nAccording to Jabal, hosting her company\u2019s roadshow over Zoom had some advantages, as her team didn\u2019t have to focus on tackling a single geography per day, allowing Unity to \u201coptimize\u201d its time based on who the company wanted to meet, instead, of say, whomever was free in Boston or Chicago on a particular Tuesday morning.<\/p>\n
Unity IPO aims to fuel growth across gaming and beyond<\/p>\n
Jabal\u2019s comments aren\u2019t the first that TechCrunch has heard regarding roadshows going well in a digital format instead of as an in-person presentation. If the old-school roadshow survives, we\u2019ll be surprised, though private jet companies will miss the business.
\nTalking about the transaction itself, Jabal stressed the connection between her company\u2019s employees, value\u00a0 and their access to that same value. Unity\u2019s IPO was unique in that existing and former employees were able to trade 15% of their vested holdings in the company on day one, excluding \u201ccurrent executive officers and directors,\u201d per SEC filings.
\nThat act does not seemed to have dampened enthusiasm for the company\u2019s shares, and could have helped boost early float, allowing for the two sides of the supply and demand curves to more quickly meet close to the company\u2019s real value, instead of a scarcity-driven, more artificial figure.<\/p>\n
Bear and bull cases for Unity\u2019s IPO<\/p>\n
Regarding Unity\u2019s IPO pricing, Jabal discussed what she called a \u201cvery data-driven process.\u201d The result of that process was an IPO price that came in above its raised range, and still rose during its first day\u2019s trading, but less than 50%. That\u2019s about as good an outcome as you can hope for in an IPO.
\nOne final thing for the SaaS nerds out there. Unity\u2019s \u201cdollar-based net expansion rate\u201d went from very good to outstanding in 2020, or in the words of the S-1\/A:
\nOur dollar-based net expansion rate, which measures expansion in existing customers\u2019 revenue over a trailing 12-month period, grew from 124% as of December 31, 2018 to 133% as of December 31, 2019, and from 129% as of June 30, 2019 to 142% as of June 30, 2020, demonstrating the power of this strategy.
\nWe had to ask. And the answer, per Jabal, was a combination of the company\u2019s platform strength and how customers tend to use more of Unity\u2019s services over time, which she described as growing with their customers. And the second key element was 2020\u2019s unique dynamics that gave Unity a \u201ctailwind\u201d thanks to \u201cincreased usage, particularly in gaming.\u201d
\nLooking at our own gaming levels in 2020 compared to 2019, that checks out.
\nThis post closes the book on this week\u2019s IPO class. Tired yet? Don\u2019t be. Palantir is up next, and then Asana .<\/p>\n