This article has been written at pre-IPO, and information shared are taken from the Razer's IPO prospectus available on the Hong Kong Stock Exchange's website. Views are not meant as advice for share purchase.
Razer is a Singapore-founded gaming hardware company, selling premium gaming peripherals. It was founded in 2005 in Singapore by former lawyer Tan Ming Liang. The company has been growing fairly well since its inception and has built an ecosystem around gaming.
10 Learnings from Razer's IPO Prospectus
The Razer Ecosystem consists of hardware, software and services:
Hardware includes premium gaming peripherals (high precision mice, fully customizable keyboards, audio devices, mouse mats, and gaming console controllers) and systems (incluing laptops) Software includes Razer Software Platform, with +35 million registered users, comprises an IoT platform connecting Razer's hardware devices to the platform. Razer Cortex is their all-in-one game launcher, game optimizer, game aggregator and price comparison engine. Services include zGold virtual credits service to monetize Razer Software Platform.
Industries and Competitive Landscape
Global entertainment industry is expected to grow from USD 869 billion (2016) to USD 950 billion (2021),
Global games market excluding hardware is expected to generate USD 132 billion in 2021, up from USD 101 billion (2016),
Global gaming hardware market in 2016 generated USD 2.2 billion for peripherals while gaming systems generated USD 19 billion,
Global esports market had a global audience of 322 million people (2016) where revenue from the industry is expected to hit USD 1.6 billion (2021).
Revenue has grown from USD 320 million in 2015 to USD 392 million in 2016. A solid ~20% growth, while net losses also went up by ~192% from USD 20 million in 2015 to USD 59 million in 2016.
The company is expanding its revenue streams by adding new products and services. These initiatives will require substantial funding in the short-term to generate more revenue, and in the mid to long term, generate (hopefully) a healthy profit margin. To give some perspectives: Shares were valued at US$ 76/share during Series A while for Series D, shares were valued at US$ 2304/share. This 30x fold increase might be indicative of the potential IPO pricing, but public market is known to react otherwise..In 2016, Meitu went public on the Hong Kong Stock Exchange raising US$ 629 million at approximately HK$ 8.50/share, for a valuation of US$ 4.6 billion, slight below its pre-IPO valuation target.
As mentioned, Razer is introducing new products and one of them is from an acquisition of Nextbit Systems which produce the Robin Smartphone. This new product should be an entry strategy into mobile gaming for Razer, while leveraging on its ecosystem, mostly software, to create a seamless user experience from mobile to desktop and vice-versa.
Again, Razer is expanding its services, going into virtual credits, a common denominator with the gaming industry. zGold, as Razer called it, will enable gamers to use the virtual credit to exchange for digital content and items from various service providers.
Razer invested in MOL Global. This strategic investment should assist Razer, in not only capture the virtual credit environment but also expand its software features to enable more electronic payment transactions.
Razer opened its 6th RazerStore in Hong Kong with a partnership with CK Hutchison's Three Group. The strategic partnership with CK Hutchison is also likely linked to the investment taken from Li Ka Shing during the Series D. The company also has RazerStores in Taipei, Manila, Bangkok, San Francisco and Shanghai.
Razer launched zVentures in 2016 with the aim to invest in a wide range of companies playing a role in the Razer ecosystem. With esports trend going up on mobile and VR, there are definitely some early stage investment opportunities here for Razer to identify exciting new products and services to add to its portfolio.
Peripherals accounted for the lion share of the company's revenue for the past 3 years 2014-2016, at 87.1%, 88.3% and 76.2% respectively. In 2016, sales from Razer systems increased to 23.1%. We can expect to see new revenue streams post-IPO.
Razer's valuation has not yet been disclosed, and various sources have been estimating the IPO fundraising to USD 400-600 million. In its latest venture round of financing, Razer was valued at USD 2 billion. Let's just hope the company will continue to deliver and that it's IPO will not fall flat.