Epic Games: Pre-IPO Stock Market Update
Epic Games, an American video game and software developer and publisher, has produced some of the most successful and widely popular games in the market.
The company also operates a digital video game store, and a 3D software engine called Unreal Engine, which is focused on the Metaverse.
Epic Games has a vast user base, with Fortnite, a massively successful, free-to-play online battle royale game, gathering over 400 million users worldwide. The digital video game store has 109 million users, and 48% of all next-generation video games are created using the Unreal Engine.
Investors
With its impressive portfolio of offerings, Epic Games has attracted major investors such as Tencent, the Chinese social media company, and Disney. Other notable investors include ICONIQ Growth, Kleiner Perkins, KKR, and Lightspeed. As the company gears up for its initial public offering (IPO), investors should closely monitor its financials, including valuation, revenue, and growth potential.
Valuation
Epic Games has seen significant fluctuations in its valuation over the years, with its latest primary financing round in the secondary market trading at a $15.7 billion valuation. However, this figure represents a 50% decrease from its previous primary financing round, valued at $31.5 billion on April 22. Despite this decrease in valuation, the company has raised $6.4 billion to date, a clear indication of investors' interest in the gaming industry.
While the decline in valuation may cause some investors to be concerned, it's important to note that Epic Games has still achieved significant growth in recent years, as evidenced by its impressive revenue numbers.
Revenue
In 2021, Epic Games generated $5.8 billion in revenue, which was largely due to the success of Fortnite and the company's digital video game store. Epic Games also takes a 12% cut on video games sold through its virtual store, which hosts and distributes third-party video games. This share per sale covers operating costs and generates profit for the company.
In addition, Fortnite generates revenue through in-game purchases, such as outfits, skins, and accessories. The game also offers a unique feature called "Battle Pass", which costs about $9.50 for a quarterly subscription.
Potential
While Fortnite and the digital video game store have been Epic Games' primary revenue sources, the company's Unreal Engine software could be its biggest potential revenue stream in the long term. Other companies can use the software for free, but Epic Games takes a 5% cut of all gross revenue generated by applications created using the engine.
Given the growing interest in the Metaverse, Epic Games' Unreal Engine could be a valuable tool for developers looking to create immersive virtual experiences. As more companies and industries explore the possibilities of the Metaverse, Epic Games' software could become a go-to tool for developers, driving significant growth for the company.
Conclusion
Despite a decline in valuation, the company's impressive revenue numbers and potential for growth through its Unreal Engine software make it an attractive investment opportunity. As the gaming industry and the Metaverse evolve, Epic Games is well-positioned to become a major player in the upcoming years.
