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Why Skillz Is Heading Lower Again Today

By Rich Duprey – Aug 30, 2021 at 12:10PM

Key Points

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The esports platform continues to be weighed down by doubts.

What happened

Shares of Skillz (SKLZ -6.46%) were falling 2.3% heading into noontime trading Monday on no news specific to the mobile esports platform and at odds with meme stocks like AMC Entertainment and GameStop, which had risen 7% and 3%, respectively.

So what

Despite the growth potential for Skillz's esports niche, the market has lost confidence in the platform, especially after its recent earnings report showed rising member acquisition costs in a reopening world. 

Smiling man holding mobile phone

Image source: Getty Images.

While Skillz is attempting to ameliorate those costs by acquiring Aarki, an advertising platform that should give it a more holistic (and cheaper) means of attracting new players to its platform, it needs to prove that can actually happen. 

In the meantime, a private stock placement announcement last week related to the acquisition weighed on the esports name, even though it wasn't the seller and wouldn't be receiving any of the proceeds.

Now what

Skillz continues to represent a way to get in on esports growth, along with the exponential potential of esports betting, as Skillz enables users to wager real money on mobile games played during tournaments and competitions and to play games with nonmonetary stakes.

The esports platform has over 57 million shares sold short, or 23% of its shares outstanding, giving some investors hope there could be a short squeeze in Skillz's future. 

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.

Stocks Mentioned

Skillz Inc. Stock Quote
Skillz Inc.
$0.89 (-6.46%) $0.06
GameStop Stock Quote
$23.39 (-8.49%) $-2.17
AMC Entertainment Stock Quote
AMC Entertainment
$6.75 (-9.40%) $0.70

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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