Family-focused social media platform and entertainment content provider Grom Social (NASDAQ:GROM) is seeing shares rise on Thursday. Earlier today, the company disclosed that it intends to acquire Arctic7, an emerging gaming industry service provider. Fundamentally, this buyout offers possible synergistic opportunities, thus undergirding enthusiasm for GROM stock.
According to a press release, the inclusion of Arctic7 under Grom’s umbrella “could serve as an entry point for the company to secure a foothold in the growing and lucrative gaming industry.” In addition, the move would allow Grom to “explore opportunities to leverage gaming technology to serve the entertainment needs of today’s kids and families in new, innovative ways.”
Notably, per the release, Arctic7 would “complement Grom’s existing entertainment offerings of safe, social media for kids and its growing catalog of original intellectual property from Curiosity Ink Media, which Grom acquired in 2021.”
Grom CEO Darren Marks cited the acquisition of Epic Games by Disney (NYSE:DIS) as a key example of content-gaming partnerships bolstering entertainment experiences. Through its Arctic7 acquisition, management intends to expand Grom’s “entertainment ecosystem” through various initiatives, including “content collaboration” and cross-promotional initiatives.
GROM Stock Rises on Viable Prospects
Fundamentally, GROM stock is benefiting today from sustained interest in the video-gaming entertainment. According to Grand View Research, the global video game market reached a valuation of just over $217 billion in 2022. What’s more, experts project that this market could expand at a compound annual growth rate (CAGR) of 13.4% from 2023 to 2030.
At the culmination of the forecast period, the global gaming industry could generate revenue of $583.69 billion. This estimate aligns with what other research firms have forecast as well. For example, Precedence Research notes that the sector could be worth $610.6 billion by 2032.
At the time of this writing, GROM stock features a market capitalization of just $2.22 million. So, grabbing a modest piece of this space could translate to some significant upside returns.
Arctic7 CEO Igor Efremov also expressed enthusiasm for the acquisition. “We [are] […] enthused at how the partnership can further fuel our growth as we continue to develop engaging content, grow our amazing team, and accelerate our M&A efforts working with Grom Social Enterprises on their journey to become a leading entertainment company,” said the Efermov.
Why It Matters
Although the dramatic rise today is encouraging, prospective investors should approach this investment idea with extreme caution. Since the start of the year, GROM is still down by about 5%. In the past year, shares have also lost about 93%. Unsurprisingly, no analysts currently cover GROM stock.
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On the date of publication, Josh Enomoto did not hold (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.
