Scientific Games’ newly named social gaming division SciPlay announced the beginning of its initial public offering of 22 million shares of Class A common stock. The initial public offering price was expected to be between $14 and $16 per share.
SciPlay expects to grant the underwriters a 30-day option to purchase up to an additional 3.3 million shares of its Class A common stock at the initial public offering price. The shares are expected to trade on the NASDAQ Global Select Market under the ticker symbol SCPL.
Scientific Games officials said last week the company hopes to raise $308 million to $352 million through the offering. David Katz of Jefferies wrote a note predicting that Scientific Games’ debt-to-EBITDA could be reduced a quarter turn, assuming those return predictions are accurate.
SciPlay announced that it expects to post a profit between $13 million and $15 million for the first quarter compared with a loss of $1.1 million in the same period last year, according to preliminary numbers published last week. The unit’s first quarter revenue will rise to between $117 million and $119 million compared with $97.5 in the same period last year, an increase of as much as 22 percent.
Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. will act as lead book-running managers for the offering, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Macquarie Capital (USA) Inc. and RBC Capital Markets, LLC will act as book-running managers for the offering, and Stifel, Nicolaus & Company, Incorporated and Wedbush Securities Inc. will act as co-managers for the offering.
In the fourth quarter, Scientific Games said its revenue from social gaming grew 19 percent to $113.7 million.
In a note to investors, Jefferies Gaming analyst David Katz said he was encouraged by several developments at Scientific Games that have moved the company’s share price higher.
“We view the proposed IPO of Scientific Games’ social unit as an incremental positive in terms of capturing value and incrementally reducing the leverage profile of the overall business, although it does improve optics towards capital allocation and commitment towards de-risking the stock,” Katz said. “We expect continued scrutiny surrounding the capital position to drive the near-term stock performance rather than the results.”
Scientific Games’ Social Division, formerly part of SG Digital, is now identified as one of four operating divisions—the other three being Gaming, Lottery and Digital. One of SG’s legacy companies, WMS Gaming, was one of the pioneers in the social gaming market with its JackpotParty.com site. The company now known as SciPlay is one of the leading social gaming providers in the industry, with a library of more than 1,800 free-to-play games
Scientific Games reported in February that it made a net profit of US$206.8 million in the fourth quarter of 2018, having made a net a loss of US$43.1 million a year earlier. Fourth-quarter revenue rose by 7.6 percent year-on-year to US$885.7 million.
There has been no schedule announced for completion of the overall IPO.
