Unity Stock Slumps as Board Rejects AppLovin’s Buyout Offer


  • Unity Software (U) rejected AppLovin’s (APP) bid to buy out Unity.
  • Additionally, ironSource (IS) reaffirmed its willingness to merge with Unity Software.
  • Unity stock slid 7% soon after today’s opening bell.
Unity stock - Unity Stock Slumps as Board Rejects AppLovin’s Buyout Offer

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It seems that there’s a soap opera going on between Unity Software (NYSE:U), AppLovin (NASDAQ:APP) and ironSource (NYSE:IS). Last week, AppLovin bid to buy out Unity Software. Then, this morning, it was revealed that Unity rejected AppLovin’s buyout bid. Also, ironSource reaffirmed its commitment to merge with Unity, a transaction that hasn’t actually happened but could be more likely now. In the wake of all this drama, Unity stock slumped 7% in early trading today.

Obviously, there’s a lot to unpack here. First of all, the business models of AppLovin and ironSource are somewhat similar. After all, they both focus on helping developers market and commercialize their apps. Unity’s business model is different, as the company is primarily a 3D-content platform.

It might seem that both AppLovin and ironSource could be a good fit for a business combination with Unity Software. However, Unity’s board of directors doesn’t seem to see the synergy with AppLovin. Just recently, Unity Software rejected AppLovin’s all-stock takeover proposal. This would have had an enterprise value of $20 billion.

What’s Happening With Unity Stock?

This development apparently isn’t sitting well with Unity’s shareholders today. By 10:30 a.m. Eastern, the Unity stock price already fell 7% and touched the $54 level.

This doesn’t necessarily mean that Unity Software won’t still be a takeover target. In a fresh press release, ironSource commented on Unity’s rejection of AppLovin’s buyout proposal. Specifically, ironSource “strongly reaffirmed its commitment to a merger with ironSource.”

This merger hasn’t actually taken place, and there’s no guarantee that it will happen. Still, Unity’s rejection of AppLovin’s offer seems to leave the door open for ironSource to make a merger deal with Unity Software.

There’s even a timeline in which such a merger could take place: “The Board of Directors of ironSource remains committed to completing this strategically and financially compelling combination in the fourth quarter of this year and is confident it will create superior value for shareholders, customers, and employees.”

ironSource stock was up 10% while Unity stock sank, so today’s traders may be wagering on a successful ironSource-Unity merger. A word to the wise, though: Don’t assume anything until you actually see it happen.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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