Earlier this week, we were wondering about Glu Mobile's high share price.
Light has now been shed on the process as the company has announced it's planning to sell 7.3 million shares at a price of $2.05 to raise $15 million, of which a net amount of $13.8 million would be used for further investment in its social gaming drive.
At time of writing, Glu's (NASDAQ:GLUU) share price was $2.16, down from its two year peak of $2.77 of last week.
A further 1,097,561 shares will be available to the underwriters, which if exercised, would take the overall value of the deal to $16 million.
This comes on top of the $13.5 million the company raised from its new and existing shareholders in the summer of 2010.
Bring on the freemium
Glu says it will use the cash to further the development of its global social gaming community, including infrastructure, third party developer relationships, direct to consumer distribution channels, and the glu.com portal.
The mention of third party developer is significant as to-date, the vast majority of Glu's mobile games have been developed inhouse.
Direct to consumer distribution channels also make sense as rivals such as Gameloft and EA Mobile have their own webstores for the sale of games, notably for the tricky-to-monetise Android platform.
Glu also points out it intends to use, "the remainder of the proceeds from this offering for working capital and other general corporate purposes, which may include the acquisition of, or investment in, companies, technologies, products or assets that complement our business as well as the repayment of our outstanding obligations under our $8.0 million revolving credit facility, pursuant to which we had $1.6 million outstanding as of September 30, 2010."
Waiting for rebound
The background to the company's requirement for more cash is that - as the SEC sale prospectus says - the transition from games sold from feature phones via carrier desks to those sold via app stores onto smartphones will see Glu's revenue continue to fall in 2011.
"Although we expect our revenues from advanced platforms and smartphones to increase in 2011 as compared to 2010, we do not expect this increase to fully offset the anticipated decline in revenues from games we develop for feature phones in our traditional carrier-based business, and therefore in 2011 we expect that our total revenue will decline quarter over quarter from our expected revenue level for the quarter ended December 31, 2010," the company notes.
Indeed, this has been the situation for Glu since 2008. For example, its Q2 2010 revenue was down 21 percent year-on-year, and it expects to make an annual loss of between $15.5 million and $15.9 million for 2010.
However, it's been finding some success with its new free-top-play model. As of September 2010, it revealed its user base has grown to 31.9 million cumulative installations on iOS, with 4.2 million monthly active users and 413,000 daily active users.
[source: SEC]
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Contributing Editor
A Pocket Gamer co-founder, Jon is Contributing Editor at PG.biz which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.
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