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Why Skillz Stock Is Rising Today

By Rich Duprey – Aug 24, 2021 at 11:43AM

Key Points

  • Skillz filed for a private placement related to its acquisition of Aarki.
  • The demand-side advertising platform should help Skillz reduce its member acquisition costs.
  • The deal also will let Skillz offer new opportunities for member engagement.

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The stock sale that it filed for yesterday represents an enormous opportunity for the esports platform.

What happened

Shares of Skillz (SKLZ 0.83%) were rising 5% in morning trading Tuesday after the mobile esports platform provider filed a prospectus yesterday for selling 4.4 million shares. Skillz managed to eke out a small 2% gain on Monday after having been down earlier in the day.

So what

It's not Skillz selling shares, but rather a private placement related to its acquisition of Aarki, a global demand-side advertising platform that ought to help it reduce its customer acquisition costs.

Skillz stock has been battered as rising member acquisition expenses helped widen the platform's losses last quarter. Shares are down 46% year to date and 75% below their 52-week high hit back in February.

People playing video games online

Image source: Getty Images.

Now what

Aarki could be a significant growth accelerator for Skillz because it allows the esports platform to offer players more challenging and varied options, such as battle royale capabilities. That has become an increasingly popular mode of play online.

Because Skillz is establishing the placement of the shares for others, it won't realize any of the proceeds from their sale, though it has agreed to pay the costs associated with the sale. And while there's no guarantee the sellers will actually sell any of the stock, even if all of the shares are sold, the total number represents little more than 1% of Skillz's 344 million outstanding shares.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skillz Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Skillz Inc. Stock Quote
Skillz Inc.
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