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Unity sells shares above target range, raises $1.3B

Yahoo Finance’s Alexis Christoforous and Brian Sozzi discuss Unity’s IPO.

Video Transcript

BRIAN SOZZI: Dan, another hot IPO on tap today, Unity rang the opening bell today. Is there-- how promising is this company?

DAN HOWLEY: I mean, look, you know, it's almost like video games are big business, right? You know, Unity is a massive, massive company. They do-- they create, basically you can think of it as the sandbox in which developers create games. So they're given all the toys by the folks at Unity, and then they build them how they want to get the games they want.

And I think, you know, that is massive for indie developers and for smartphone and tablet game developers, as well as PC and console. But this kind of software is incredibly important for companies who want to get into the space. And so Unity offers its platform for free up until they reach a certain earned revenue limit, the game companies that is, and then they start to pay into Unity.

So I think this is something-- it's, you know, one of the major developers out there. It's Unity and Epic are two of the game engines that are used most. So this could be considered right up there alongside Epic.

Obviously, that's not public yet. But you know, with Unity going public, it will be interesting to see. And I think it's going to continue to just keep rocking and rolling, because, look, more people are getting into gaming every day. So this is going to get more and more exposure as more games are created.

ALEXIS CHRISTOFOROUS: But you know, there's a common theme here, Dan, with all of these hot software IPOs this year. We spoke to Snowflake's CEO a little earlier in the show. I mean, his company's stock more than doubled in its Wall Street debuts. The company's still not profitable.

Then you've got Unity. It lost over $160 million last year. It did have revenue of over $540 million. But-- but are investors continually getting ahead of themselves when it comes to these-- these albeit growth software companies, but still, no profits to speak of yet?

DAN HOWLEY: Yeah, I mean, this is the-- kind of the big fear, I think, that a lot of investors have. And you know, it really is kind of hedging that they will eventually get some kind of profitability. But we've seen this throughout kind of the last few years with these big tech companies, and they're not profitable. They're consistently losing money.

They IPO. They continue to lose money. But people still dive-- push their money into it. And I think, you know, the biggest obviously are Uber and Lyft. You know, we haven't seen them turn profitable yet. And you know, they-- they've suffered increasing issues as a result of the pandemic.

But I think for something like Unity, you know, the growth trajectory is there, right. They continue to push out these-- well, developers continue to push out these games that use their engine. And as long as they can, you know, successfully fight off Epic, they will do well going forward.

And you know, that also takes into consideration that we wouldn't get another gaming engine that's so suited for the mobile gaming market, which is, by the way, the largest gaming market out there. Mobile games, smartphones, tablets, that's where people go, and that's kind of the gateway. And then those apps and games can be translated to the consoles and PCs down the line.

But I think, really, you know, it's where you get those-- those big darling hits. I mean, "Pokemon Go" used Unity, right, still uses Unity. So there's big-name games out there that are using this engine.

So I think down the line, it should turn profitable. You hope. I'm not predicting that or anything. But you know, when it comes to the trajectory, it really kind of points to good things to come, as far as the amount of game companies that are going to continue to use it.

BRIAN SOZZI: And worth--

ALEXIS CHRISTOFOROUS: All right--

BRIAN SOZZI: --noting-- worth noting here, too, real quick, guys, seeing Jared-- Jared Blikre flagging me, early indications about $57 to $59 a share on Unity. Priced at $52. Alexis.

ALEXIS CHRISTOFOROUS: Yeah, I know. I was just going to say that when they priced, their market cap was $13.7 billion. But now, given where it's indicated to open, they've got a market cap a lot bigger than that. And again, no profits, Brian.

BRIAN SOZZI: No profits, indeed. Dan Howley, thanks so much.