Shares of mobile game company PopReach Corp. (POPR-X) surged by more than 25 per cent on Thursday after the Toronto-based company announced a strategic investment from Chinese e-commerce giant Alibaba Group Holding Ltd.'s global investment arm.
The stock traded up 46 cents to $1.48 on Thursday on the TSX Venture Exchange. It hit a record $1.58 earlier in the day. PopReach went public on July 8 at 72 cents.
The company behind game franchises such as Smurfs' Village, City Girl Life and Kingdoms of Camelot said it has received a “binding subscription agreement” from New Insight Incentive Plan Company, a subsidiary of Alibaba’s eWTP Tech Innovation Fund LP to invest $5-milion in PopReach.
The fund will subscribe for about 6.9 million shares of PopReach at a price of 72 cents each, which is a 10-per-cent discount to the closing price of the shares on the TSX Venture Exchange on Sept. 24. A company spokesman said Sept. 24 is the date the company signed the letter of intent for the investment.
The spokesman said it’s a “straight common share equity investment with no warrants, board representation” and that eWTP will become a special advisor for PopReach in Asia. He said more than 75 per cent of the company’s current revenue from North America.
The company said it intends to use the net proceeds from the private placement to fund acquisitions and for other general corporate purposes.
“The team at eWTP are preeminent investors in the games industry and we are delighted to have them as shareholders of PopReach,” PopReach co-founder and CEO Jon Walsh said in a statement. “In addition to providing us with additional capital to execute against our pipeline of acquisition opportunities, we are thrilled [to] be able to leverage eWTP’s strategic insights, connections, and expert advice as PopReach’s Special Advisor to Asia.”
CY Chen, a partner eWTP describes PopReach as “a great addition” to its portfolio. “We believe they have a unique and compelling growth opportunity in the free to play mobile gaming space, and we look forward to supporting the management team to help them achieve their global expansion goals,” he stated in the release.
Echelon Capital Market analyst Rob Goff increased his target price on the stock to $2 from $1.70 on Thursday and maintained his “speculative buy” rating.
“With the investment and partnering, the company will be able to receive expert support and [advice] from the investors especially in the Asia market where Alibaba is well renowned as one of the gaming and digital commerce leaders,” Mr. Goff wrote in a note.
He also said the association “should strengthen POPR’s plans to establish [its] entry plan in China and assist by making introductions in the market that is structurally distinct from North America. We see the longer-term potential where the association with Alibaba could facilitate working with Alibaba to empower player acquisition strategies.”
Beacon Securities analysts Gabriel Leung said in a note Thursday that the investment is being made by eWTP’s fund that invests in potential leaders of the gaming industry.
“In our opinion, this strategic investment represents a key catalyst for a couple of reasons,” he wrote. “First, it provides PopReach with a war chest to execute on its pipeline of M&A opportunities. Second, we believe it provides a huge validation point for PopReach’s strategy of consolidating, operating and growing proven, profitable games and game franchises.”
He reiterated his “speculative buy” rating and $1.85 target on PopReach.