Shares of social casino developer Playstudios (NASDAQ: MYPS) rallied in after-hours trading on Tuesday following the announcement that the company is purchasing $24.6 million of its equity held by Microsoft (NASDAQ: MSFT). While not a traditional share repurchase program, this move will reduce Playstudios’ shares outstanding count by 8.6%.
Details of the Transaction
Playstudios purchased the shares at a price of $2.11 per share, funded with available cash. According to a statement issued by Las Vegas-based Playstudios, “The repurchase reduces the number of shares of the Company’s outstanding common stock by approximately 8.6%.”
Despite the recent buyback, Playstudios shares have faced significant declines, dropping 48.9% over the past 12 months and 15.5% on a year-to-date basis.
Commitment to Shareholder Value
Playstudios became a public company in June 2021 after merging with Acies Acquisition, a blank-check firm initiated by former MGM Resorts International (NYSE: MGM) CEO Jim Murren. Since then, the stock has struggled, but management remains committed to enhancing shareholder value.
In addition to the transaction with Microsoft, Playstudios is currently executing a $50 million share buyback program. CEO Andrew Pascal emphasized the company’s dedication to shareholders, stating, “Since becoming a public company, PLAYSTUDIOS has demonstrated a commitment to enhancing shareholder value and maximizing our returns on capital. Purchasing the shares held by Microsoft is a further example of this as we were able to efficiently repurchase 8.6% of our outstanding common stock at a discount to current market prices.”
Playstudios’ Offerings and Loyalty Program
Playstudios, known for games such as myVegas Slots and myVegas Blackjack, has its own loyalty program called playAwards. Players can redeem points for amenities and lodging at MGM venues, including high-end locations like Aria, Bellagio, and Mandalay Bay on the Las Vegas Strip, as well as some of MGM’s regional casinos.
Future Prospects and Bullish Factors
While Playstudios stock is currently in a slump and has garnered little attention from Wall Street, there are several positive factors that could strengthen the investment thesis. The company operates in a fast-growing segment, is profitable, and carries no debt.
Analyst Sandeep David highlighted that Playstudios has $133 million in cash, which is about 40% of its current market capitalization. This significant cash position suggests that the stock is undervalued, as it is not receiving credit for this stockpile.
David also noted that this cash position could increase quarterly, potentially allowing Playstudios to deliver a special dividend, though the company has not confirmed such plans.
Conclusion
Playstudios’ recent share buyback from Microsoft demonstrates the company’s commitment to enhancing shareholder value and efficiently managing its capital. Despite current stock performance challenges, the company’s strong cash position, profitability, and growth prospects present a promising outlook for the future. Investors will be watching closely to see how these factors play out and whether Playstudios will announce further shareholder-friendly actions such as a special dividend.
