Skillz is set to go public through a merger with a blank-check firm run by veteran Hollywood executives, a deal valuing the San Francisco mobile-gaming company at $3.5 billion.
Former MGM Holdings movie studio chief Harry Sloan has agreed to merge Flying Eagle Acquisition Corp. FEAC with Skillz. Sloan is Flying Eagle's chairman and chief executive.
Investors including Wellington, Fidelity, Franklin Templeton and Neuberger Berman funds have committed to invest $159 million at $10 per Flying Eagle share.
After the deal closes, Skillz said, it expects to have about $250 million of cash and equivalents on its balance sheet.
Skillz is a mobile-gaming platform where users can play and compete with others in games such as "Solitaire Cube" and "21 Blitz."
The company makes money by sharing revenue with developers whose games are on the Skillz platform.
The gaming industry is larger than movies, music, and books, with more than 2.7 billion gamers playing monthly and 10 million developers worldwide, Skillz said in a statement.
Mobile is the fastest-growing segment of the gaming market, projected to increase more than double to $150 billion in 2025 from $68 billion in 2019.
Skillz, which employs about 250, had roughly 2.6 million active users at the end of the second quarter.
The company expects to power more than 2 billion esports tournaments in 2020 and facilitate $1.6 billion in paid entry fees for games hosted on its platform.
Skillz Founder Andrew Paradise will remain CEO following the transaction, and Sloan will join the board.
The deal is subject to approval by holders of both Skillz and Flying Eagle and to clearance by regulators. Skillz hopes to close the deal in the fall.
The Wall Street Journal reported that Skillz could start trading on the New York Stock Exchange this year.
LionTree Advisors and Jefferies LLC are acting as financial advisors to Skillz.
A blank-check firm, or special purpose acquisition company, is formed specifically to raise capital through an IPO for the purpose of acquiring an existing company.
The coronavirus has created a challenging environment in which to go public, so many companies are turning to SPACs.
A record-breaking more than $30 billion has been raised this year for these SPACs, the Journal reported, citing Dealogic data.
In July, hedge-fund investor William Ackman's Pershing Square Tontine Holdings, a blank-check company, increased the size of its planned initial public offering to $4 billion. That's the largest SPAC ever raised.