Scientific Games studies social gaming business IPO

Shares of Scientific Games Corp surged 25 percent Thursday after the company said it is considering an initial public offering of its social gaming business.

The stock jumped $5.42 to $26.74 as 5.4 million shares changed hands, more than three times the average over the past 50 trading days.

The Las Vegas-based company has invested heavily in its social gaming business over the past few years as more people play online. It has launched games on Facebook and made several acquisitions, including Spicerack and Red7 Mobile.

The company’s social gaming division includes such apps as Bingo Showdown, MONOPOLY and Jackpot Party Social Casino and is one of its fastest growing segments.

Revenues for its social gaming division rose 11 percent in the third-quarter to $105 million while attributable cash flow jumped 34 percent to $27 million.

“The social gaming business continues to experience rapid growth and has reached significant scale. The company believes an IPO would provide greater flexibility to pursue additional growth initiatives specifically designed for its social gaming business, as well as unlocking additional value for Scientific Games stakeholders,” CEO Barry Cottle said in a statement Thursday before the market opened.

Social gaming along with the acquisition of NYX helped drive third quarter revenue and attributable cash flow growth, the company said.

Scientific Games third-quarter revenue rose 7 percent to $821 million while cash flow gained 9 percent to $326 million, slightly beating market expectations.

The company posted a net loss of $352 million resulting from restructuring and legal matters compared with a loss of $59.3 million in the same period a year ago.

However, Scientific Games posted free cash flow for the quarter of $123 million and paid down debt. The company trimmed its net debt leverage ratio to 6.7 times trailing 12-month cash flow.

The third-quarter “eliminated the misconception that Scientific Games was burning cash,”said Union Gaming analyst John DeCree.

Despite today’s rally, Scientific Games shares are still down nearly 50 percent this year as investors dumped stock of highly-leveraged companies as borrowing rates rose.

Contact Todd Prince at 702-383-0386 or tprince@reviewjournal.com. Follow @toddprincetv on Twitter.