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Applovin IPO: 5 things to know about a software company looking for a $ 30 billion valuation


Applovin Inc. is opening fire to value more than $ 30 billion as the app software company pricing its public offering in its bid to capture a sizable chunk of the mobile app market. is worth $ 200 billion.

On Wednesdays, Applovin
APPLICATION,
+ 10.91%

Naming a price range for its stock is $ 75 to $ 85 per person, one price that could price the company up to more than $ 30 billion. The company plans to sell at least 25 million shares and have about 360 million shares outstanding, will trade on the Nasdaq under the ticker “APP”.

Palo Alto, Calif., Company, will be a decade full in July, producing marketing software, monetization, and analytics that help app developers grow their businesses. It also has a catalog of over 200 free mobile games to play with in-app purchases. Applovin’s expected valuation is lower than a recent comparable IPO, Unity Software Inc.
U,
-4.25%
,
highly appreciated nearly 14 billion dollars at the time of IPO in September.

See more: 5 things to know about IPO Unity Software

In the Securities and Exchange Commission filing, Applovin says it sees total market opportunities around $ 189 billion, with $ 101 billion in in-app advertising revenue and around $ 88 billion in spending. for live games worldwide, citing IDC 2020 figures. Applovin expects that market opportunity to grow to $ 283 billion by 2024.

Here are five things to know about Applovin.

Business costs more than doubled, and Apple and Google are one reason

Applovin said it had sales of $ 1.45 billion in 2020, resulting in a loss of $ 125.9 million, compared with a 2019 revenue of $ 994.1 million and a net income of $ 119 million. la. In 2018, the company recorded revenue of $ 483.4 million with a loss of $ 260 million.

The major cost increase in 2020 vs. 2019 is that business costs increased 130% to $ 555.6 million, of which $ 112 million was due to payment processing fees. That payment processing fee is the same as Epic Games was not happy about payments to Apple Inc.’s
AAPL,
+ 1.34%

App Store and Alphabet Inc.’s
GOOG,
+ 1.12%

GOOGL,
+ 1.35%

Google Play Store, has run as high as 30% of purchases.

“The mobile app ecosystem depends partly on a relatively small number of third-party distribution platforms, such as the Apple App Store, Google Play Store, and Facebook, some of them. It’s a direct competitor, ”Applovin said in S-1.“ We get substantial revenue from the distribution of our apps through these third-party platforms and almost all of us. [in-app purchases] is done through the payment processing systems of these third-party platforms. “

Nearly a quarter of the proceeds will go to pay off debt

Applovin estimates it could yield a net return of around $ 1.74 billion if it is priced at the range average.

In it, the company said it plans to use about $ 400 million to pay off debt under the revolving credit mechanism. Currently, Applovin lists $ 1.6 billion in debt.

“In addition, we expect to use a portion of our net proceeds to engage in strategic acquisitions and partnerships,” Applovin said. “However, other than our pending acquisition of Adjustments, we have no definitive agreements or commitments to any significant acquisitions or partnerships at this time.” .

Acquisitions are part of a growth strategy

Most recently, Applovin announced plans to acquire Germany-based mobile app measurement and marketing company. While Applovin did not disclose the terms of the deal, Crunchbase estimates the price to be $ 1 billion.

The company has stated in its S-1 that it has “invested more than $ 1 billion in 15 strategic acquisitions and partnerships” since the beginning of 2018.

Applovin acquired mobile game developer Machine Zone Inc. in May last year for an undisclosed amount, although Crunchbase estimated the deal to be $ 500 million.

That comes after the 2019 acquisition of software development suite management platform SafeDK, the company bidding for the title in the Max Inc. app. in 2018 and mobile advertising network based in Germany Moqoqo in 2014.

“We will continue to explore and evaluate additional acquisitions, some of which may be the same size or even larger in size and investment than the Machine Zone acquisitions and the Adjust acquisitions. Waiting for our processing, ”the company said.

KKR has the majority of voting control

The company plans to offer Class A shares during the IPO, carrying one vote, while Class B shares of initial investors will have 20 votes. Applovin has raised $ 1.4 billion in funding from investors, according to Crunchbase.

Holding the reins will be KKR Denali Holdings, which will hold 72.4% of Grade B shares after the offering, accounting for 67.4% of the voting rights. Other Class B shareholders include CEO Applovin and cofounder Adam Forshhi, who will own 19.4% of Category B stock with 18.1% voting rights and Chief Financial Officer Herald Chen, with 3.2% of Class B shares and 3% of voting rights.

The company will also establish a non-voting stock, even though those shares don’t already exist.

Attempts to sell to the Chinese company were unsuccessful and KKR got involved

Had it not been for US concerns about investments in strategic assets from China, KKR would have never been involved and Applovin would not go public.

In September 2016, Applovin agreed to be fully acquired by Chinese private equity firm Orient Hontai Capital for $ 1.4 billion. More than a year later, that deal was canceled – allegedly after the Foreign Investment Commission in the United States pushed back the deal over concerns over customer data – and Applovin agrees to invest in a debt of $ 841 million from Orient Hontai. Prior to that deal, Orient Hontai invested $ 140 million in the company; Currently, Orient Hontai owns 26.2 million Class A shares.

In July 2018, KKR & Co. has invested $ 400 million in a minority stake in Applovin with approximately 110 million shares. At the proposed IPO price, that $ 400 million investment would be worth more than $ 8 billion.

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