By Wallace Witkowski
AppLovin Inc., which is bidding to catch a sizable piece of a $200 billion mobile app market, was valued at about $29 billion as the app-software company’s initial public offering priced at $80 a share.
The pricing early Thursday was in the middle of the expected price range for its shares of $75 to $85 apiece . Applovin /zigman2/quotes/226004863/composite APP -3.07% offered 22.5 million shares in the IPO to raise $1.8 billion, and shareholder KKR Denali Holdings L.P. offered 2.5 million shares to raise $200 million.
With nearly 360 million shares outstanding, the pricing values the company at about $28.6 billion.
The stock is expected to begin trading Thursday on the Nasdaq under the ticker “APP.”
The Palo Alto, Calif., company, which will be a decade old in July, makes marketing, monetization and analytics software that helps app developers grow their businesses. It also owns a portfolio of more than 200 free-to-play mobile games with in-app purchases. The expected valuation of AppLovin dwarfs that of a recent comparable IPO, Unity Software Inc. /zigman2/quotes/221035391/composite U -8.77% , which was valued at nearly $14 billion at the time of its IPO in September.
See also: 5 things to know about the Unity Software IPO
In its Securities and Exchange Commission filing, AppLovin said it sees a total market opportunity of about $189 billion, with $101 billion of that in in-app advertising revenue and about $88 billion in worldwide direct-game spending, citing IDC 2020 figures. AppLovin expects that market opportunity to grow to $283 billion by 2024.
Here are five things to know about AppLovin.
The cost of business more than doubled, and Apple and Google are a reason
AppLovin said it took in $1.45 billion in revenue in 2020, resulting in a loss of $125.9 million, versus 2019 revenue of $994.1 million and net income of $119 million. In 2018, the company booked revenue of $483.4 million for a loss of $260 million.
The big cost hike in 2020 versus 2019 was a 130% jump in cost-of-business expenses to $555.6 million, with $112 million of it due to payment-processing fees. Those payment-processing fees are the same kind that Epic Games balked about paying to Apple Inc.’s /zigman2/quotes/202934861/composite AAPL -2.58% App Store and Alphabet Inc.’s /zigman2/quotes/205453964/composite GOOG -2.38% /zigman2/quotes/202490156/composite GOOGL -2.56% Google Play store, that ran as high as 30% of purchases.
“The mobile-app ecosystem depends in part on a relatively small number of third-party distribution platforms, such as the Apple App Store, the Google Play store, and Facebook, some of which are direct competitors,” AppLovin said in its S-1. “We derive significant revenue from the distribution of our apps through these third-party platforms and almost all of our [in-app purchases] are made through the payment processing systems of these third-party platforms.”
Nearly a quarter of proceeds will go to pay down debt
AppLovin estimates it stands to bring in net proceeds of about $1.74 billion if it prices at the mid-point of its range.
Of that, the company said it plans to use about $400 million to pay off debt under its revolving credit facility. Currently, AppLovin lists $1.6 billion in debt.
“Additionally, we expect to use a portion of the net proceeds to enter into strategic acquisitions and partnerships,” AppLovin said. “However, other than our pending acquisition of Adjust, we do not have definitive agreements or commitments for any material acquisitions or partnerships at this time.”