Unity Software shares skyrocket on IPO

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Shares of Unity Software, which supplies technology to video game developers, rose 48% in their public debut on Friday, briefly lifting the company’s valuation above $ 20 billion.

The day one pop of Unity’s stock price followed an initial public offering that used an unconventional process to gauge investor demand. Its stock rose to $ 76.79 at the start of trading after the company sold 25 million shares at $ 52 per unit, raising $ 1.3 billion in revenue.

Unity shares, which trade on the New York Stock Exchange under the symbol “U”, slipped from their initial highs and ended the day up 31%.

The start of trading came after Unity increased the range marketed to investors from $ 34 to $ 42 per share to between $ 44 and $ 48 per share on Wednesday, reflecting strong demand for its offering.

Instead of leaving the price of its shares to bankers and a handful of investors, Unity had solicited offers – with prices – through an online system run by Goldman Sachs.

At the end of that process, Unity valued the offer above its expected range, handing out shares to all investors who had expressed an interest at that level, according to a person familiar with the process.

β€œI don’t know if more companies will follow, but we’re just happy our investors seem happy,” said Kim Jabal, CFO of Unity. β€œIt worked for us and we are happy with the result.”

Unity is best known for its game engine which developers use to create complex graphics. It has also spread to other industries, selling the software to companies such as Volvo Cars, which are looking to incorporate augmented and virtual reality features into their products.

The company estimates that half of the top 1000 mobile games in Apple’s App Store and Google Play were created using its platform, which has grown to help game developers earn money through advertising. “As games multiply, content business models have evolved beyond one-time purchases to include advertising and in-app purchases,” he said in a prospectus.

San Francisco-based Unity has its roots in a Danish software company founded in 2004 and run by John Riccitiello, who previously ran video game company Electronic Arts. The company posted a net loss of $ 163.2 million on revenue of $ 541.8 million last year, up 42% from the previous year.

The IPO comes after Snowflake raised $ 3.4 billion in the largest ever listing in the United States from a software company. The company’s shares doubled when it debuted on Wednesday, reflecting the exceptional demand for tech stocks this year. Shares of JFrog, an Israeli software company also listed on Wednesday, jumped 47%.

Sequoia Capital and Silver Lake were the biggest investors in Unity before the IPO, with Sequoia holding more than 24%. Goldman Sachs and Credit Suisse were the main underwriters.

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