Weekly News Digest #2

Saudi Arabian PIF Increases Its Stake in Nintendo

Saudi Arabia-based Public Investment Fund (PIF) has increased its stake in Nintendo(TSE:7974) to 6.07%. Before that, the fund owned 5.01% in Nintendo, acquired back in May’22. Considering the current market capitalization of Nintendo, the 1.6% stake in the company might be worth somewhere around $870m.

This is the first deal from PIF this year, and we are very likely to see much more coming in 2023. Last year, the fund revealed its plans to spend $37.8B for investments in the gaming market, including $13B for the acquisition of a major publisher.

It actually all started back in Q4’21, but we learned about PIF’s activity only in Feb’22 with the first $3.3B investment spread among Activision Blizzard, EA, and Take-Two was revealed. This was, of course, only the beginning. By the end of the year, we saw PIF allocating another $5.3B across six investments and spending $1.5B on the ESL Gaming and FaceIt acquisitions through its subsidiary Savvy Games Group.

There is, of course, an obvious local market potential: according to Newzoo, in 2021, the Saudi games market generated $946m via consumer spending, with mobile games accounting for around 55% of the sum — over 21 million mobile gamers spent $520m. Moreover, 89% of Saudi population identify themselves as gamers.

However, PIF doesn’t limit itself to the local market. The governmental fund seems to acknowledge the global gaming industry as a promising field of investing. This may help Saudi Arabia to diversify the region’s economy, while also gathering information, connections, and expertise from public gaming companies. The latter might be further used to develop the local ecosystem and accelerate the growth of the fund’s subsidiary Savvy Gaming Group. For us, PIF’s activity is most interesting as a sign of industry recognition not only among the growing number of funds and institutions, but also on the governmental level.

With this said, we will now list all the gaming transactions of the Public Investment Fund for those who would like to dive deeper in their analysis. Overall, we now know about $11B spent by PIF to diversify in gaming:

— In Jul’22, PIF acquired 8.1% in Sweden-based video game holding company Embracer Group (SSE: EMBRAC B) for a total of approximately $1B (SEK 10.3B). The acquired shares gave PIF 5.4% of the votes in the company;
— In May’22, the company made the above mentioned acquisition of 5.01% stake in Nintendo;
— In Apr’22, PIF increased its stake in Japan-based PC & console games developer SNK Corporation to 96.18% stake. The total consideration is almost $400m for 62.88% of all shares;
— In Mar’22, it purchased undisclosed stakes in Japan-based multiplatform games developerCapcom (TYO: 9697), and Japan-based multiplatform games developer Nexon (TYO: 3659) for a combined consideration of around $1.2B;
— In Mar’22, PIF acquired a 2.57% stake in Korea-based multiplatform games publisher NCSoft (KRX: 036570) for a total of $235m;
— In Jan’22, PIF purchased ESL Gaming ($1.05B) and FaceIt ($450m), via its subsidiary company Savvy Gaming Group for a combined amount of $1.5B in an all-cash transaction. The two acquired companies were announced to be merging to create a global platform for competitive gaming, named ESL Facelt Group;
— In Q4’21, PIF acquired stakes in three major gaming companies for a total consideration of over $3.3B. The stakes were bought in:
> Activision Blizzard (NASDAQ: ATVI) — 15 million shares (3.5% stake) for around $1.4B;
> Electronic Arts (NASDAQ: EA) — 7.42 million shares (2.6% stake) for around $1B;
> Take-Two Interactive Software (NASDAQ: TTWO) — 3.97 million shares (3.5% stake) for around $825.5m.

We want to thank MGVC, Hiro Capital, and The Games Fund for supporting this digest.

 MERGERS & ACQUISITIONS

UK-based multimedia content producer Catalis Group has acquired US-based outsourcing games developer Secret 6. The financial terms of the deal were not disclosed. The acquisition will allow Catalis Group to expand its production capabilities and to enter new markets, since Secret 6 has offices in Spain, Manila, and the USA.

US-based media and entertainment company QYOU Media has acquired 51% stake in India-based game developer Maxamtech Digital Ventures. Financial terms of the deal were not disclosed, however QYOU also agreed to purchase the remain of shares till 2025. The deal will allow QYOU to expand its audience and product portfolio. Both companies are planning to launch a new gaming portal this year.

VENTURE FINANCING

China-based entertainment service provider Bilibili (NASDAQ: BILI) has raised $408.9m via secondary equity offering at a 7% discount. The raised funds will be used to repay $384.8 million of its outstanding 0.5% convertible senior notes due December 2026.

UK-based newly established PC & Console game developer Maverick Games has reportedly closed a Seed funding. The amount and the list of investors were not disclosed. The studio is formed by ex-Playground Games members and will focus on the development of PC & Console games. The investment will be used to expand the team and to develop an unannounced open-world title.

India-based mobile game developer Giga Fun Studios has raised $2.4m in Seed funding. The round was co-led by Lumikai, and Fireside Ventures. Riverwalk Holdings, Kettleborough VC, and All in Capital have also participated in this funding. The funds will be used for the development of casual titles for the international and Indian markets.

Israel-based tech company Playstream has raised $2m in funding. The round was led by vgames. The funds will be used to further develop an AI engine for its content-generating platform Spikes.gg, which generates gaming or any live content from live streams.

Denmark-based startup Multiscription has raised $1.6m in funding. The round was led by Sisu Game Ventures, with participation from Tigrim, and the Danish Growth Fund. The funds will be used to expand the team and to further develop its in-game monetisation capabilities. The company offers subscription services to mobile game publishers as an alternative to in-game advertising.

Korea-based VR games developer Stoic Entertainment has reportedly raised $4.84m (₩6B) in Series A funding. Hanwha Investment & Securities, KB Investment, Hana Securities, and others have participated in this round. The funding will be used to accelerate the company’s growth and expansion on the global market.

Sweden-based game developer Seidr has raised an undisclosed amount in Seed funding. The round was led by Andreessen Horowitz (a16z). The company aims to create ‘cross-play’ mid-core titles where players can team up or compete regardless of which console they choose to play from. The funds will be used to expand the team and to develop the premier title of the studio.

Denmark-based Ghost Ship Games, a studio behind Deep Rock Galactic, has invested an undisclosed sum into Danish VR gaming studio Bolverk Games. With the deal, Ghost Ship Games diversifies into VR and increases its presence on the domestic market. As for Bolverk Games, this is an opportunity to gain creative support and expertise from the new shareholder.