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SciPlay IPO: What Investors Need to Know About the Mobile Game Specialist

Eric Volkman, The Motley Fool

Do you hunger to win some money? If so, you might want to fire up your smartphone and download a casino-style game from SciPlay and take your chances. 

Alternatively, you could soon buy some of SciPlay's stock. The company, a previously announced spinoff of veteran gaming and lotto technology purveyor Scientific Games (NASDAQ: SGMS), will hit soon hit the stock market following its IPO.

With that in mind, let's pull the lever, watch the wheels, and see if this upcoming issue is a winner.

Woman using smartphone

Image source: Getty Images

The IPO details

Twenty-two million Class A shares of SciPlay are to be sold in the IPO, at a price of $14 to $16 per share. The stock is slated to begin trading on May 3 on the Nasdaq exchange under the ticker symbol SCPL.

SciPlay will still be a glorified subsidiary after the IPO, as Scientific Games is to hold 100% of the company's B stock. This confers 10 times the voting rights as the Class A stock being sold in the IPO. Scientific Games will also own nearly 83% of the Class A shares.

The IPO's underwriting syndicate is led by Bank of America Merrill Lynch, JPMorgan Chase subsidiary J.P. Morgan, and Deutsche Bank.

A casino in your pocket

Essentially, SciPlay is the mobile gaming arm of Scientific Games. SciPlay has developed and released seven titles so far. 

One of its games, Monopoly Slots, utilizes an intellectual-property license held by Scientific Games for the classic board game produced by Hasbro. As a separate company, SciPlay pays an annual fee to access licenses in Scientific Games' portfolio, including such familiar brand names as James Bond and The Godfather.

SciPlay's games are popular, and they generally get good reviews. In the Apple app store, Monopoly Slots has an average 4.9 (out of 5) rating from more than 51,000 reviews. It is also ranked No. 52 in popularity on Apple's list of casino games, of which there are a great many.

Brick-and-mortar casinos are generally good businesses, and if SciPlay's results are anything to go by, the same can be said for mobile-casino specialists. In the short life span of the company in its present form, it posted just over $416 million in revenue in 2018, and netted $39 million in profit. Those numbers were significantly higher than 2017's $361 million and $23 million, respectively.

Spin and win?

SciPlay's business isn't unique or new -- enter the keyword "casino" in your Android or Apple device's app store and see how many results you get.

That said, SciPlay has managed to carve out its own niche and those high ratings and thousands of downloads certainly help. The company cites data showing it had a market share of just under 9% in its key mobile social casino segment in Q4 2018, an encouraging figure given the vast size of this category.

Although SciPlay will no longer technically be a Scientific Games subsidiary, it will likely benefit by remaining close to its soon-to-be-ex-parent. Scientific Games is a very old hand at casino technology, and it has done a good job keeping itself state-of-the-art in this realm.

Recently, Scientific Games signed a partnership agreement with Wynn Resorts to underpin a big Wynn digital sports gaming project. Although SciPlay wasn't mentioned in the sparse press release heralding the deal, it benefits from its closeness to a cutting-edge digital gaming company even if it's not involved.

All in all, I don't know if I can get that excited about the stock of a company operating in an already crowded field that lacks high barriers to entry. But SciPlay is profitable, has experience behind it and a solid partner/ex-parent, and seems to be adept at making a buck in its early days. On that basis, its shares might prove to be a good investment.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Hasbro. The Motley Fool is short shares of Hasbro and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.