DoubleDown Interactive, the social casino giant majority owned by South Korea’s DoubleU Games, is looking to raise up to $100m from an initial public offering on the Nasdaq stock exchange.
In a filing with the Korea Stock Exchange (KRX), DoubleU said the offering would provide funding to support strategic acquisitions, as well as repaying financial investors.
This will see it issue 400,000 new ordinary shares in the business, as well as putting 360,000 shares currently held by South Korean venture capital fund STIC Investments up for sale.
While pricing details have not yet been provided, a filing with the US Securities and Exchange Commission reveals the business expects to generate up to $100m through the listing.
Seattle-based DoubleDown emerged as one of the major players in social casino in 2012, when International Game Technology’s (IGT) acquired the business in a $500m deal. This came amid a flurry of social casino M&A, which saw a number of real-money gaming business acquire free-to-play studios.
While most other studios have branched out to launch multiple apps and products, DoubleDown currently only offers four: DoubleDown Casino, DoubleDown Fort Knox, DoubleDown Classic, and Ellen’s Road to Riches.
DoubleDown Casino, its most enduring product, has been ranked among the top 20 highest-grossing mobile games for the past five years, according to mobile-social analytics specialist App Annie. DoubleDown Fort Knox, its most recent launch, had been installed on more than 3m devices as of 31 March, 2020.
Its apps are populated by free-to-play games developed by DoubleU and IGT’s land-based titles repurposed for social, as well as proprietary content developed in-house. This allows it to offer players more than 2,000 titles, the SEC filing noted.
DoubleDowns limited number of apps also ensures all activity is concentrated within a small number of products, giving the studio much greater insights into player behaviour, it added.
As well as pursuing M&A opportunities with funding raised through the IPO, DoubleDown also aims to use the proceeds to further enhance its current portfolio, as well as to expand into new casual gaming verticals.
The filing also provided insights into DoubleDown’s financial health, revealing that the business saw revenue grow 11.4% year-on-year to $76.1m in the first quarter of 2020. After operating expenses of $58.7m, up 12.9%, and financial expenses, the business posted a net profit of $12.9m for the quarter, up 46.6%.
Average monthly active users (MAUs) for the period grew marginally to 3.0m, with average daily actives (DAUs) remaining flat at 1.2m, though average revenue per daily active user rose 12.9% to $0.70.
For the year to 31 December 2019, revenue grew 2.5% to $273.6m. Operating expenses for the year declined to $205.3m, and after financial items, net profit was up 44.6% to $36.3m. Average MAUs for the year, however, fell 15.2% to 2.8m, with DAUs declining to 1.2m. ARPDAU still rose, from $0.57 in 2018 to $0.64.
Looking ahead, the business warned that it could face significant expenses fighting class action lawsuits filed in Washington State, where courts have ruled that social casino is a form of illegal gambling. This ruling, based on a judge’s interpretation of in-app currency as something of value, created a precedent for players to have money spent purchasing virtual chips refunded.
This has already prompted Churchill Downs and Aristocrat Leisure, the current and former owners of social studio Big Fish Games, to create a $155m fund to settle claims made by players.
DoubleDown said that were plaintiffs to secure judgements in their favour against the business, its operating results could be “materially negatively impacted”. Furthermore, it added, this could restrict it from offering its free-to-play games in Washington State.