IPO
Shares of iDreamSky, a five year old gaming company known for tweaking existing games for the Chinese market, began trading on Nasdaq Thursday at $15 after the company raised $115.5 million. Owned by Tencent (the Chinese Internet conglomerate), iDreamSky is profitable after seeing 2013 revenues skyrocket to $40.7 million from $3.1 million in 2012. 85 percent of these revenues come from in-game purchases from its Temple Run, Fruit Ninja, and Subway Surfers franchises. iDreamSky becomes the first Chinese company to go public in Q3, but it will not be the last. Alibaba, which could raise as much as $20 billion, is expected to IPO after Labor Day.
M&A
This week’s M&A activity was dominated by two deals that did not happen: Sprint’s failed bid to buy T-Mobile, and the flirtation between 21st Century Fox and Time Warner. Both would have sent shockwaves through their respective industries but collapsed around the same time this past Tuesday.
Sprint reportedly offered $32 billion to acquire T-Mobile. If it had been successful, the combination of the world’s third and fourth largest mobile operators would have certainly posed problems for AT&T and Verizon, industry leaders that have pulled far ahead of the competition in recent years. Alas, the deal was thwarted, at least in part by the Federal Communications Commission. Although it could be argued that there are greater problems posed by the current duopoly of AT&T and Verizon, the FCC has prevented consolidation in the industry from four providers to three before. In 2011, it rejected AT&T’s $39 billion bid for T-Mobile USA (as it was known then), and there were indications that it would have done the same to the Sprint deal this time around.
21st Century Fox Chairman and CEO Rupert Murdoch, meanwhile, withdrew his company’s $80 billion (in cash and shares) bid before complaining: “Time Warner management and its board refused to engage..an offer which was highly compelling.” Although the Time Warner subsidiary CNN likely would have been sold seperately, the deal still would have united two major film studios and the Fox family of networks with HBO. Like the Sprint deal, the Fox acquisition of Time Warner also would have been subject to intense scrutiny from regulators. Already busy evaluating the consequences of the Comcast/Time Warner Cable (which split from Time Warner in 2009) merger and the consolidation of AT&T with DirecTV, America’s biggest satellite TV provider, regulators can let out a sigh of relief knowing that there were no more deals added to their docket this week.
All of that being said, there was M&A activity aside from the Sprint/T-Mobile and Fox/Time Warner deals that actually went through, as Facebook and Google continued on their shopping sprees by making relatively small purchases.
Facebook announced Thursday morning that it would acquire PrivateCore, a Palo Alto-based server security company. Facebook plans to integrate PruvateCore’s vCage technology, which is used to authenticate remote servers, into its own server stack. PrivateCore had raised $2.3 million in VC from investors TEEC Angel Fund and Foundation Capital.
Also on Thursday, Google announced that its YouTube division has acquired Directr, a mobile app provider that assists small businesses in making promotional videos. The two year old company raised $1.7 million in funding and will now offer its app for free as the newest member of YouTube’s video ads division. Terms of the deal were not disclosed.