Glu Mobile Inc. (NASDAQ:GLUU) and Iceland’s Plain Vanilla Games Corp. share the important ability to develop games that go viral in app stores. However, Plain Vanilla, which made trivia apps for smartphone devices popular, has agreed to get up to $7.5 million in funding from Glu Mobile, which will have an option to buy its Reykjavik-based competitor. The market has welcomed the rumors and GLUU stock was trading more than six percent higher on January 22.
I think this could be just the beginning.
Glu Mobile’s “Hollywood” game app, based on Kim Kardashian, became wildly popular, yet Glu Mobile recently celebrated its 10th anniversary of development in the mobile games arena—a $30-billion industry by some estimates. (Source: “After a decade, Kim Kardashian maker Glu Mobile shoots for $1B revenues in five years,” Venturebeat, June 2, 2015.)
GLUU stock hit a yearly high of $6.99 in May 2015, only to collapse in August, falling to $2.12 per share. This makes Glu Mobile stock cheap. No wonder news of its growing ties to Plain Vanilla Games Corp. have triggered a trend reversal into bullish territory.
This Could Be Huge for GLUU Stock
Glu Mobile is also a survivor and a veteran in the app industry, having experienced the difficult transition from feature phones to smartphones, while its Kim Kardashian-inspired game, “Hollywood,” has consolidated its position within the industry. (Source: Ibid.)
The reason investors are bullish about GLUU stock is that the company is now targeting the $1.0-billion annual sales mark over the next five years, according to CEO Niccolo de Masi. (Source: Ibid.) “Hollywood” alone generated $74.3 million, or more than 30% of Glu Mobile’s revenue, in 2014. The company wants to exploit the celebrity model to account for at least 50% of its business, having already signed deals with Britney Spears, Katy Perry, and Kendall and Kyle Jenner. (Source: Ibid.)
Now, by allying itself with Plain Vanilla’s “QuizUp,” GLUU stock could continue to rise in value, as the company has gained an opportunity to reach its five-year ambitious sales goal even sooner. Indeed, Plain Vanilla and NBC formed a partnership last October aimed at propping up “QuizUp’s” content for an actual TV show, filmed in a studio, allowing for players to participate both in-studio and through the app, wherever they might be located. (Source: “Glu Mobile To Invest Up To $7.5 Million In QuizUp, With Option To Acquire,” TechCrunch, January 21, 2016.)
“Glu is looking to consolidate once our partnership proves out the monetization capability of the QuizUp audience and app,” said Glu Mobile CEO and chairman Niccolo de Masi. “At the moment the company has yet to begin monetizing significantly and as such would not be accretive to acquire outright.” (Source: Ibid.)
Plain Vanilla became famous in late 2013, thanks to “QuizUp,” which was the fastest-growing app store game ever. The 40 million players that used the app were not enough to monetize the company and the lower player numbers in recent months have almost pushed the need for a partnership. (Source: “Glu Mobile invests in and might acquire troubled QuizUp dev Plain Vanilla if TV show works,” Pocket Gamer Biz, January 21, 2016.)
The Bottom Line on GLUU Stock
GLUU stock is poised for a bullish run, as the partnership between Glu Mobile—itself the product of a merger in 2005 of Sorrent and Macrospace—will turn to consolidation. In 2008, the company bought Superscape1, which is specialized in developing games for mobile phones. Glu Mobile will invest $7.5 million to design the first season of the show, retaining the option to redeem Plain Vanilla at the end of the test run at a pre-negotiated price.
Should the partnership succeed, such that “QuizUp” increases its revenues, Glu Mobile will consider taking over QuizUp outright, according to Niccolo de Masi. (Source: “Glu announces $7.5M investment in QuizUp developer ahead of TV show, may lead to a full acquisition,” VentureBeat, January 21, 2016.)