Why the Market Is Wrong on Unity Software's Merger With ironSource
Share prices of 3D content creator Unity Software (NYSE: U) plunged 25% last week, with most of the drop occurring after the company announced it was acquiring ironSource (NYSE: IS), a leading monetization platform for mobile app developers. The addition of ironSource is highly complementary to Unity's game services business.
However, the timing and terms of the deal are raising eyebrows. Unity said the deal was an all-stock transaction worth $4.4 billion, which could change depending on how the stock performs in the near term. But given that Unity stock has already fallen 84% off its highs this year, investors are not looking favorably on the company's decision to dilute shareholders by issuing more shares to finance the deal.
Moreover, in the same announcement, management lowered its full-year revenue guidance. It now expects full-year 2022 revenue to come in between $1.3 billion to $1.35 billion, compared to previous expectations for $1.35 billion to $1.425 billion. The company cited economic headwinds and competitive dynamics with respect to its app monetization business, which added fuel to the fire.
Source Fool.com
