AppLovin Shares Decline 10% on Proposal to Buy Unity Software
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AppLovin Shares Decline 10% on Proposal to Buy Unity Software

Story Highlights

AppLovin’s proposed merger could make it a formidable player in the growing mobile games market. However, a sharp drop in the share price reflects investors’ concerns about the pricing of the deal.

Mobile app developer Applovin Corporation (NASDAQ: APP) recently revealed a $17.5 billion merger proposal with video game software development company Unity Software Inc. (U). Shares of the company did not react kindly to the news, as they fell about 10% in the normal trading hours.

Details of the Merger Proposal

Under the terms of the merger proposal, Unity shareholders will have 49% of the voting rights in the merged entity. However, they would control 55% of the entity with a majority on the board.

Notably, the deal values Unity at $58.85 a share, which represents a premium of 16.9% from its closing price yesterday. Further, the deal entails Unity’s enterprise value at $20 billion.

Meanwhile, Unity CEO John Riccitiello would lead the merged entity, and AppLovin CEO Adam Foroughi would be the chief operating officer.

The merged entity expects to become a one-stop shop for mobile games and app developers. Further, the combined entity will compete with fellow app development company ironSource (IS).

Interestingly, Unity had agreed to acquire ironSource in a $4.4 billion deal last month. However, the proposed merger has called for a termination of the deal.

Website Traffic Trends Are Encouraging for AppLovin

Rising website traffic witnessed by AppLovin’s website reflects the company’s strong product demand even amid a slowdown in the digital advertising market.

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into AppLovin’s performance this quarter.

Meanwhile, the AppLovin website recorded a 146.77% monthly rise in global visits in July, compared to the same period last year. Also, year-to-date, AppLovin website traffic increased by 102.97%, compared to the previous year.

Learn how Website Traffic can help you research your favorite stocks.

Should Investors Invest in AppLovin?

Top investors remain bullish about AppLovin’s prospects and are loading up on the company’s stock.

TipRanks’ Stock Investors tool shows that top investors currently have a Very Positive stance on APP. Further, 10.6% of the top portfolios tracked by TipRanks, increased their exposure to APP stock over the past 30 days.

Overall, the consensus among analysts for AppLovin stock is a Strong Buy based on 10 unanimous Buys. The APP average price target of $61.50 implies an upside potential of 70.8% from current levels. Shares have declined 37% over the past year.

Key Takeaways

Investors seem to be apprehensive about the pricing of the deal, as evidenced by the sudden drop in the company’s share price. However, the market for mobile games is lucrative and is projected to grow to $103.5 billion by the end of this year. Therefore, with the proposed merger, AppLovin can become the foremost player in the mobile app development space and seize a large market share in this expanding market.

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