It makes sense to want to ride the wave, given the popularity of Fortnite over the previous three years. You may start investing in Epic Games using the information below!
Epic Games said on April 13th that it had secured an extra $1 billion in investment at a $28.7 billion value. With this round of funding, Sony increased its past strategic investments in Epic by contributing $200 million.
The significant investment round ensures that Epic Games will continue to be privately held for the foreseeable future. Still, another indication of Epic's long-term ambition is the press release's lofty heading, "Announcing a $1 Billion Round to Support Epic's Long-Term Vision to the Metaverse." It's conceivable that Epic Games may have to access public markets in the coming years if the business keeps up its aggressive expenditure to achieve its objective of building the metaverse.
You could be anticipating the day Epic Games' stock symbol makes its debut on the stock exchanges if you believe GameStop is a stock you can't afford to miss. And it makes perfect sense since the earnings are very real despite Fortnite taking place in a realm of fiction where the preferred money is fictitious V-bucks.
However, the desire to acquire this business is not limited to gamers; Wall Street bankers are also quite keen to invest in Epic Games. The IPO of the Epic Games shares is sure to be Epic. Epic Games stock, however, is subject to several dangers and could let down buyers who purchase shares once the ticker for the company becomes accessible as an IPO.
Here are several factors that investors should think about before purchasing shares once Epic Games stock becomes tradeable.
Why Investors Want To See Epic Games' IPO in 2021 is explained here.
Epic is one of, if not the, biggest privately traded gaming firms, even though Roblox just entered the public markets and game engine maker Unity has an IPO scheduled for 2020. There are several reasons to be thrilled about an Epic Games IPO, including the potent software that aids businesses in creating visually intensive games (Unreal Engine) and a production studio that is riding high on the popularity of Fortnite.
Bull Case: Why Purchase Stock in Epic Games?
Have you tried out Fortnite yet? If so, you probably comprehend why the stock will be in high demand when it enters the market. For many adolescent guys, playing the game is a rite of passage and a cultural phenomenon. With more than 350 million players, Fortnite Nation would be bigger than the United States if it were its nation.
The Wall Street Journal noted that parents are engaged in an "unwinnable fight" to convince their children to stop playing Fortnite in an article on the game's addiction.
These expenditures mount up rapidly. According to 2018 research, 70% of Fortnite players purchase digital goods, and those that do so spend $84.67 on average. 2019 saw $1.8 billion in sales from Fortnite alone, according to Nielsen statistics.
Smart people know that Fortnite is more than just a video game and is instead a cultural and lifestyle brand with various revenue streams. For instance, musician Travis Scott made $20 million on Fortnite last year... for a nine-minute virtual performance!
However, this is just the beginning! The potential for expansion in the video gaming sector is considerable. No longer seen as a time waster, gaming With a worldwide industry that produces more than $1 billion in revenue from an audience of roughly 500 million watchers, esports is swiftly becoming a genuine employment option.
For decades, the Fortnite world will play a significant role in defining esports and the gaming industry, and that's only one property.
For Epic Games, things improve even more. Whoever's name is splashed on the title screen won't matter; the firm will still gain. Investors in the know are aware of the potency of the Unreal Engine game development platform from Epic Games. Publishers like Microsoft Studios, which collaborates with Epic Games on the Gears of War series, have swiftly adopted Unreal Engine as the standard game development platform.
Bear Case: Why I Missed the Epic Games IPO.
The epic (pun intended) conflict between Epic Games and the app ecosystem giants Apple and Google is the main risk against investing in Epic Games stock. Both firms that charge transaction fees that may be as high as 30% of the transaction value have drawn the ire of app developers, but Epic Games has been the more active in pushing the limit.
In August, Epic Games developed a payment method for its Fortnite app that prevented Apple from collecting this charge. The tech giant swiftly delisted Epic Games' highly regarded title from the App Store. Instead of working behind the scenes to settle the dispute, Epic Games started a PR campaign to mobilize developers against Apple and then filed an antitrust case, saying Apple had broken the law.
This is a major long-term worry, given that mobile income is a huge growth engine and aids in bringing new gamers to Epic Games' library of video games.
However, it doesn't seem like Apple's prohibitions have had a substantial impact on Fortnite's popularity as of yet. The business announced in December that a record 15.3 million concurrent gamers took part in an event, and an additional 3.4 million people watched it on YouTube and Twitch.
However, switching costs are minimal for customers, who are fickle and might quickly flock to a new massively multiplayer online (MMO) game as soon as another successful game is launched. The success of Fortnite generates a halo effect around future games and the Unreal Engine.
When may I purchase shares in Epic Games?
If you are a non-accredited investor (those meeting the yearly income or total net worth criteria set by the Securities and Exchange Commission), you must wait until Epic Games files for an IPO or completes a reverse merger with an existing "blank check" SPAC.
Unfortunately, it doesn't seem likely that Epic Games will make its stock market debut in 2021.
Although Tim Sweeney has not provided a date for filing for going public, private investors have offered to buy shares in Epic Games, and thus the company does not need to accept public funding.
Tim Sweeney has also been vocal in his opposition to revenue-enhancing tactics that he views as damaging to customers, including loot boxes and user manipulation to boost monetization. Games that publicly listed corporations own often use these techniques.
Tim Sweeney still has controlling ownership in the company after 30 years, demonstrating his preference for maintaining control. In the end, using the public markets requires giving up control, and he probably believes the quarterly requirements of shareholders may clash with his long-term goals.
(There is, however, a backdoor method to acquire Epic Games shares; see below.)
Who Currently Owns Epic Games Stock?
The present investors, the current price per share of Epic Games stock, or the company's worth is all information that Epic Games is exempt from disclosing to the general public.
However, our keen interest makes us well-versed in the organization. In 1991, Sweeney launched Epic Games as Potomac Computer System. He is still the CEO of the business, and Sweeney has $5.3 billion worth of stock in the business, according to Forbes.
Several venture capital firms support Epic Games shares, such as Lightspeed Venture Partners, Kohlberg Kravis Roberts & Company, and Smash Ventures. Even government employees, at least those located north of the border, join in on the fun. The most recent fundraising round included the Ontario Teachers Pension Plan Board.
Many retail investors are eager to learn more about Epic Games, given their impressive list of supporters, and you can too!
When you hold shares of companies like Sony, KKR & Company, or Tencent Holdings Inc. that are exposed to Epic Games while buying firms based simply on their stakes in other businesses is not advised (apart from maybe Berkshire Hathaway), it is noteworthy that Tencent owns almost 40% of Epic Games.
How much does Epic Games' stock now trade for?
Epic Games has a more strategic approach than many privately owned firms, which will accept capital from anybody prepared to provide it. Despite having a nearly 30-year existence, it has been stated that as of 2021, the firm has only raised $3.4 billion in capital throughout three rounds, with the most recent round valued at $17.3 billion post-money.
The stock value of Epic Games will fluctuate every time the business engages in a new round of financing, so we can assume that when the firm goes public, it will be valued more than it is right now.
With the completion of its most recent round of investment in April 2021, Epic will have raised a total of around $4.4 billion, bringing its equity value to $28.7 billion.
Even if Epic Games is now one of the most valuable private firms in the world, the price may still be low. Consider Unity, which just went public and will be valued at $28 billion by April 2021. Roblox is valued at $45 billion, even more than Roblox.
Publicly traded firms only use stock symbols because they enable investors to swiftly assess their investment performance among a sea of flashing tickers and to be informed of changes in stock price on public exchanges. Epic Games does not need a stock symbol as a privately held firm.
Epic Games will ultimately need to choose a stock symbol when they enter the public markets. Even while it's conceivable they'll decide on the NASDAQ market; it's more probable the firm would list its shares there.
Historically, more established businesses like equity investor Sony have favored NYSE, sometimes known as the "Big Board." Newer stocks seek to list on the NASDAQ market, which is geared toward technology. Additionally, there is precedence for video game equities to list on the NASDAQ, most notably Activision Blizzard, a World of Warcraft rival.
When that happens, an NYSE listing for the stock ticker of Epic Games is not altogether improbable. Tim Sweeney just sent a Tweet to Roblox congratulating them on their impending launch on the open markets. Roblox is deciding to conduct a direct listing with NYSE, which is a simpler procedure than an IPO since it raises no new money and only lists existing shares on the public markets, in contrast to most businesses seeking to do a SPAC or an IPO.
The stock symbol won't be impacted by Epic Games' decision to do a SPAC, direct listing, or conventional IPO. However, the stock symbol for Epic Games may change depending on whether it decides to list on the NYSE or NASDAQ. Equities listed on the New York Stock Exchange often have symbols of three letters or fewer, such as SNE for Sony, whereas stocks listed on the NASDAQ typically have four letters (ATVI).
Once it goes public, Epic will have a choice of symbols like EPIC and GAME if it lists on the NASDAQ. If it decides on the NYSE, EPG is an option and would seem to be a good match for the stock symbol for Epic Games.
Many novice investors are unaware of Epic Games' IPO, including if it will take place. It's difficult to suggest purchasing or avoiding the IPO at this time without knowing the share price or thoroughly examining Epic Games' financials.
For prospective investors, we do, however, have some useful preliminary data. The stock valuation of Epic Games seems to be respectable by conventional standards, in contrast to other recent IPOs. A $5 billion sales prediction for 2020 indicates that the stock price of Epic Games is around 5.6 times revenue. Activision Blizzard, a publicly listed company, trades at ten times revenue, and Roblox, which trades at around 50 times 2020 revenue, makes Epic Games' stock price appear like a bargain.
But dangers abound. 2020 will be a terrific year for the top line for Epic Games since, as is understandable, engagement with the Fortnite game drives most of the company's income. Growth is not certain, however, since it was estimated that sales in 2019 were $4.2 billion, down 25% from the previous year.
Public investors prefer equities with a strong track record of revenue growth, which Epic may find challenging to achieve given that demand for its games may fluctuate over time. And finally, throughout the first five years, existing firms often outperform IPOs.
This is speculative since it seems Epic Games won't apply for its IPO in 2021. One of the greatest methods for long-term investors to get exposure to esports and gaming expansion, in general, is via Epic Games stock. Investors' excitement over the company's launch on the stock market is understandable.
Competitors to Epic Games You Can Invest In
There are a few rivals that you may invest in before Epic Games going public.
These businesses provide useful comparison points for what we may anticipate from an Epic Games IPO shortly.
Activision Blizzard (NASDAQ: ATVI)
Before reading this article, even if you had never heard of Activision Blizzard, Inc., the odds are that you have at least heard of the video games that it has produced.
Activision Blizzard, the main rival of Epic Games in the battle royale genre, is the developer of popular online video games, including Call of Duty: Warzone, Overwatch, and World of Warcraft.
Notably, one of the all-time biggest online player bases was for World of Warcraft. This approach adds a monthly membership fee to the game's original purchase price.
Even if the number of members has decreased, the game continues to be widely used.
The projected market worth of Activision Blizzard, Inc. is $72 billion. The Covid-19 epidemic, which has caused individuals to spend more time inside, is probably to blame for the increase in value.
Roblox Inc. (NYSE: ROBLOX)
The first thing that comes to mind when you think about Roblox is a character resembling a block.
Even though the firm was established in 2004, Roblox has greatly increased its popularity in the last year.
Roblox is special because it has been mistakenly classified as a game, yet it is much more than that. In actuality, it's not even a game! It is a platform that enables people to create playable video games for other players.
Due to its distinctiveness, Roblox stock may be a great substitute for Epic Games stock since it fills a need that its rivals don't.
Do You Need to Hold Off Until Epic Games IPOs?
It's generally better not to wait for an Epic Games stock IPO if you want to invest in the video game business. Several lucrative substitutes are available, such as Activision Blizzard, Roblox, and EA.
There are many more to pick from; these are just a few of the major players on the market.
Once it is listed on a stock exchange, Epic Games may be a wise investment. It is innovating in practically every aspect of the video game business, and its prices are rising.
The business is doing well with the help of the Epic Games Store, license payments, and IPs.
Additionally, you may already participate in the action by purchasing Tencent stocks.
Final Reflections
Epic Games stock is not accessible right now. All signs suggest that Tim Sweeney, Tencent Holdings, and other private investors are happy with the state of the business.
Since it is a privately held company, Epic Games has repeatedly shown that it is more than capable of obtaining the money required to continue expansion. Therefore, don't anticipate seeing an IPO for Epic Games very soon.
Given Epic's efforts to monopolize every facet of the video game industry, few video game stocks have potential equal to this.
In contrast to other game makers, the business provides various services in addition to games. Additionally, Fortnite, one of the most popular battle royale games ever released, was introduced by Epic Games.
If Epic Games can maintain its upward trend, investing in its stock might be highly rewarding if it decides to go public.
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