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Are gaming SPACs back? After a lull because of a choppy stock market, PowerUp Acquisition announced last week it was raising $250 million in an initial public offering for its special purpose acquisition company (SPAC).
A SPAC is a blank check company that raises money first and then acquires a business, taking it public in a process that circumvents the longer time it takes to do an IPO.
New York-based PowerUp Acquisition is led by executive chairman Bruce Hack, the former CEO of Vivendi Games; and CEO and director Jack Tretton, the former president and CEO of Sony Computer Entertainment America. They are joined by chief financial officer Michael Olson, CFO of Version1. Mike Vorhaus of Vorhaus Advisors is senior advisor.
Tretton used to compete head to head against Microsoft and Nintendo. And it’s ironic that former Nintendo of America president Reggie Fils-Amie is heading his own SPAC, in partnership with United Talent Agency veterans. Their timing is interesting, as $85 billion worth of deals last year involved game companies, according to Drake Star Partners. And Drake Star expects a total of $150 billion in deals to take place in 2022, given that $85 billion in deals were already announced just in January alone.
PowerUp Acquisition plans to leverage management’s experience to target businesses within the interactive media, digital media, sports, entertainment, and/or leisure sectors, with a particular focus on video gaming, gaming adjacent, and new metaverse video gaming businesses. I interviewed Hack and Vorhaus about their plans. Gabriel Schilllinger, a payments and gaming entrepreneur, is president of PowerUp Acquisition.
Hack said that the good thing about the long process in getting the SPAC in order (since the spring of 2021) was that the company got to study the gaming industry and its surrounding ecosystem well. The team spent time evaluating what would be desirable or feasible.
I asked if $250 million was enough to buy much of anything in the game industry these days, where a lot of companies are selling for 4.2 times sales, according to Quantum Tech Partners. But Hack noted that the company could raise additional money via a private investment in a public equity (PIPE), which could possibly get the company more access to funds.
Hack noted that he spent about six years in gaming and more in entertainment, and he had never met Tretton before, even though Tretton spent more than 25 years in the business.
“As I’ve been telling friends, it’s just fun to be working with Jack and the team,” Hack said. “I am simultaneously impressed, obviously with the track record that I’m telling you about but also our interactions. We go into these conversations on what to do. We get to a better place as a result.”
Both Hack and Tretton are veterans of buying a lot of game businesses over the years. Hack merged Vivendi with Blizzard, and he helped turn the money-losing Vivendi games into a profitable company by the time he left, Vorhaus said in an interview.
Hack said the company is searching for excellent teams and excellent products or services.
“We’re looking for things that have a competitive advantage,” he said. “And we’re looking for a transaction where we can add value, but where the transaction is done at the right value.”
I asked if it was harder to do a SPAC now, given the topsy-turvy stock market.
“Honestly, I don’t know how to answer that question,” he said. “I’m not smart enough to answer that question, but I am laser focused on buying something that that can take the capital that we do have and in a way help the company capture its future.”
Hack said the team did 31 Zoom calls for its roadshow with investors, and that culminated in the sale of the stock last week.
“We made it super clear to people at that time that we’re going to buy real businesses,” Hack said. “This wasn’t going to be like a zero revenue metaverse company and we put a lot of time into finding those targets.”
He noted that the timing has been good considering Microsoft is buying Activision Blizzard for $68.7 billion and Take-Two is buying Zynga for $12.7 billion.
“We didn’t choose to go public during that time, but we were lucky that our vision on gaming and this tidal wave came at the same time,” Hack said.
Hack said that the company will focus on gaming and gaming adjacent industries, including esports, analytics companies, monetization companies, tools companies such as engine makers, and other sectors.
“If we feel we can add value there in a significant way, we will do it,” he said.
Looking back on his Vivendi Games years, Hack said the company was losing $249 million a year when he took over. He had to scale back a lot of games and focus on the ones that were in production. The company was working on a bunch of massively multiplayer online role-playing games, and Hack had to cancel two of them. One of the survivors was Blizzard’s World of Warcraft, which became successful with a subscription model.
After Vivendi, Hack went on to become chairman of Technicolor and he became an active early stage adviser and investor. One of his investments was in Overwolf, which has become a leader in game modding. And Hack said he was pleased to see the mobile game business take off and become a standard part of a lot of PC and console game companies.
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