Mobile gaming company Playtika (NASDAQ:PLTK) is trading higher in Wednesday’s after-hours session following publication of a regulatory document indicating the firm could repurchase up to $600 million worth of its shares.
Playtika’s late Wednesday pop arrives after the stock surged 6.79% on volume that was more than 50% above the daily average during traditional trading hours. The Israeli company’s board of directors approved the repurchase program.
On August 24, 2022, the Board of Directors Playtika Holding Corp. approved the disclosure of certain information related to its previously announced strategic alternative process in anticipation of commencing a potential issuer self-tender offer to repurchase up to $600 million in shares of common stock, par value $0.01, of the Company in the near future at a fixed price based on a customary premium for issuer self-tender offers,” according to a Form 8-K filing with the Securities and Exchange Commission (SEC).
While the plan is an obvious catalyst for the stock, Playtika carefully noted there are no assurances it will buy back $600 million worth of its shares. That’s standard for buyback plans as no company is legally obligated to repurchase the stated dollar amount.
“The size of the Offer to be repurchased, the price per Share, and the timing of the Offer will depend on a variety of factors, including market conditions, regulatory requirements, and other corporate considerations. Furthermore, the Company may decide not to commence the Offer and, if commenced, could amend or terminate the Offer in accordance with applicable law and the terms of the Offer,” according to the regulatory document.
Why It Matters to Playtika Investors
News of the buyback effort is meaningful to Playtika investors on multiple fronts, not the least is the fact that the stock is heavily shorted.
Entering today, 13.30% of the gaming company’s shares outstanding were sold short, good for a short ratio of 4.46, according to Finviz data. Should the Caesars Slots publisher push ahead with plans to repurchase its own stock, short sellers could be forced to cover bearish positions, in turn driving the shares higher in the process.
Additionally, Playtika could meaningfully reduce its shares outstanding tally by repurchasing $600 million. Based on today’s closing price of $11.01, Playtika could buy back 54.49 million shares, which represents a significant chunk of its 412.40 million shares outstanding standing.
The stock is down 57.56% over the past year and needs to nearly triple to return to the 52-week high of $30.
Busy Year for Playtika
Playtika headlines are abundant this year. Playtika Holding UK II Limited (PHUK II) is controlled by Chinese investors Giant Network Group Co. Ltd. and Yunfeng Capital. Yunfeng is a private equity group started by Alibaba founder Jack Ma. Playtika revealed in January that the investor was mulling the sale of 15% to 25% of its interest in the gaming company.
That was followed by news that the gaming company was exploring a sale. In June, Joffre Capital announced the purchase of a 20% stake in Playtika, acquiring those shares from PHUK II. Liquidity needs at Giant/Alpha stoked the share sale.
In the 8-K, Playtika confirms it received a variety of non-binding offers before PHUK II and Joffre Palace Holdings Limited (JPHL) reached an agreement.
“On August 24, 2022, the Joffre SPA was amended to extend the Pre-Closing Date to the later of September 30, 2022 and five business days after the date a Distribution Amount (as defined in the Joffre SPA) is received by the Giant/Alpha Group if such Distribution Amount is not received on or prior to September 30, 2022,” according to the SEC document.
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