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Why Skillz Was Beating the Market on Monday

By Eric Volkman – Aug 2, 2021 at 4:21PM

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A new partnership promises greater wealth and success.

What happened

The stock of mobile games platform operator Skillz (NYSE:SKLZ) was a winner on Monday, as it was well outpacing the gain of the S&P 500 index in late afternoon trading. The reason for this was a new deal the company inked with a European peer.

So what

Monday morning, Skillz said it has invested $50 million for a minority stake in Germany-based Exit Games; it did not specify how large a stake this is. Skillz Founder and CEO Andrew Paradise will join Exit Games' board as an observer.

Additionally, the two companies have formally established a strategic partnership.

Exit Games operates Photon, which it describes as "The world's No. 1 independent networking engine and multiplayer platform."

Young person triumphantly looking at a smartphone.

Image source: Getty Images.

Photon is certainly a big presence in the mobile video game world. According to Skillz, it has served as a foundation for more than 700,000 applications -- a dizzying number by any standard. Exit Games' other partners include some of the most recognized names in video game development and publishing, including Electronic Arts (NYSE:EA) and Ubisoft.

In Skillz's press release trumpeting the deal, Paradise was quoted as saying that "Bringing the world's best synchronous, multiplayer gaming technology to Skillz unlocks tremendous opportunity, greatly accelerating our entry into popular genres like fighting, first-person shooter, and racing."

Now what

As always in such deals, though, the proof is in the execution; let's see how Paradise and his team exploit their opportunity. Regardless, $50 million isn't a huge spend to establish such a potentially lucrative partnership, and investors are right to be bullish on the arrangement.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skillz Inc. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

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