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Unity shares jump in market debut, CEO says 'here for the long-term'

Unity Software Inc. opened trading on Friday at $75 after its $1.3 billion IPO was priced at $52 per share, above its $44 to $48 offering range. Unity Software CEO John Riccitiello joins The Final Round to break down the company’s IPO and its influence within the 3D content market space.

Video Transcript

MYLES UDLAND: Well, it's been a busy summer and a very busy week for the IPO market. The latest company hitting the market earlier today is Unity software, powering video games and real-time 3D AR experiences. And joining us now to discuss the offering, future of the company is its CEO John Riccitiello.

John, thanks so much for joining the program. So let's just kind of start with the process of you guys going public during the pandemic with virtual roadshows, and, you know, what the market-- given the temperature of the market, I guess we could say, at this time what that process was like for you and your team.

JOHN RICCITIELLO: Well, we didn't spend a lot of time on airplanes, checking into hotels, traveling crosstown in taxis and hoping it's not raining. So one good part of it was we're sitting in a conference room and through the magic of Zoom everyone shows up on time and we're ready to go, so it was super efficient in that regard. On the other hand, there's a whole lot of people I got to know that I've never met and never seen on anything that made them any taller than about 2 and 1/2 inches. So you know, it's not the same warmth and, you know, rich bonhomie that comes from, you know, the face-to-face meeting. Handshakes were-- handshakes were tough.

MYLES UDLAND: And John, I want to ask a little bit about the process, and specifically, you know, the filing you guys had, I think it was just earlier today, on, you know, 15-- or employees being able to sell 15% of shares, essentially, you know, employees and former employees, early recipients of stock, able to participate in kind of selling some of their stake maybe earlier in the process. What kind of went into that decision to make more stock available for sale for those folks, rather than subjecting all of them to the traditional kind of lockup period?

JOHN RICCITIELLO: Well, look, you know, we didn't really set out to reinvent the IPO, but we did set out to make this a Unity IPO. And there's two really big differences from a traditional IPO. The first thing was that while we worked very closely with Goldman Sachs and Credit Suisse, we wanted direct information from investors.

And so we set up a tool where investors could register interest in our stock directly. We could see how many shares they wanted at each price. It gave us perfect information as to the market. And we're a data-centric company.

But the second point that I think is even more important, I've been looking at IPOs for years. I've lived in the Valley for 23 years now. And one of the things that I've noticed is that it seems like the people that create all the value in these companies, it's the employees. And at Unity, we are so in it together as a team, and I just couldn't see taking this company public in such a way that the participants are bankers, you know, people on various boards, folks that are investors.

I wanted the Unity employees to be part of the IPO for the company and the value they created. So we found a way. We got a lot of folks telling us we shouldn't do it, or couldn't do it, or it might be a problem. But I really wanted to make sure that Unity employees could be part. This is their day, and I wanted to be part of being part of that day so they're not really on the outside looking in, they're right in the middle of the action.

DAN ROBERTS: John, Dan Roberts here. Since we're talking about, you know, how you thought about the IPO and also making it unique, let me just Zoom out a little bit. We have a tendency on our Yahoo Finance programming to really talk about the parade of tech IPOs as one kind of moment and look at them as a whole. And we've seen a number here kind of getting in toward the end of 2020, obviously.

Of course, a couple days ago, we had the Snowflake IPO, and that just took off like a weed at the beginning. What's interesting is at the beginning of these, as they started to come fast and furious, it was interesting because it's happening amid a pandemic. And I just want to ask you if you guys, leading up to this, kind of watched the other tech IPOs, if you were worried about that, concerned, watched the action, if there was any point where you started to see that they were faring better, and if that changed you're thinking about going public amid a pandemic?

JOHN RICCITIELLO: No. I know this is going to sound a little bit crazy, but I didn't really look at it at all. And I know that's, like, one of the things that people might be want to say, but it's true in my case. And in fact, when I was conjuring this strategy up to get public, I spent a lot of time with my CFO and management team.

And at least when we started looking at dates in September, which was a long time ago before the pandemic kicked in, we had expected September to be pretty soft for IPOs. And we were quite comfortable with the idea of going out on a soft market for IPOs. In fact, in a weird sort of way, we thought it would be really cool to go public with a great company in a tough market, and we were absolutely planning on that.

And then the COVID kicked in, and we thought, oh god, now we're going to go public with a great company in a sort of a tough window right before an election, and we thought that was going to be soft. And then we got a global pandemic that's going to make it worse. And we were still convicted that we were going to go.

So ours wasn't, like, new to the scene that we wanted to go public because of there was a hot market or we weren't really paying attention to a lot of the other IPOs that are out there. And I don't know if any of them changed their plans because of the hot market for IPO. So we kind of got the market we got to by accident. You know, we're here for the long term. We're investing for the long term. And we want to grow for the long term.

MYLES UDLAND: All right, well, John, congratulations on getting the company out the door today. Again, stock is up about 30% right now, right around $68 a share as we head towards the closing bell. John Riccitiello is the CEO of Unity software. John, thanks so much for joining the show. Hopefully, we'll be in touch down the line.

JOHN RICCITIELLO: And thanks for having me. Appreciate it.