- Bidstack has achieved a significant contract with the AAA games publisher, Azerion.
- This is a significant cashflow boost and security for the company
- Bidstack shares are up near 150% since the first announcement – will the rerating continue?
Bidstack Group PLC (LON: BIDS) has seen its share price soar by near 150% since it first alluded to a significant deal with an AAA rated games publisher. When we looked at it, after the announcement, we said that the future of Bidstack’s share price would depend upon who exactly that publisher was and the more precise terms of the deal.
We now know who the deal is with, Azerion, and we also know the terms of the deal which are laid out here. The deal guarantees Bidstack $30 million in advertising spend over two years. That all sounds good but it’s not entirely rosy, the full set of news.
Delays in signing expected contracts have meant that current year revenues are likely to be only just as expected. That $30 million is advertising revenue, not margin nor, of course, profit. On the other hand, coming back the other way, this is a major deal with a significant company that will provide a certain bedrock to Bidstack’s operations.
We can also note that the management now seems to be aligned with shareholder interests given the new long-term incentive plan. At the cost of a near 10% possible dilution, the management team now has long-term options closely connected to reasonable performance targets.
For us, as traders, the question becomes what does everyone else think of this? It’s possible to think that while the new deal is good and interesting it’s reasonably fully valued at the current price. Even, that the run-up was before the full terms were revealed, and now that the market’s back in full then reconsideration of those exact terms could lead to some falling back. Here with Bidstack, as with many of the share stories, buy the rumour and sell the fact could be a useful guide for us.
It’s also possible to take the opposite view, that this is just the start of a significant rerating of Bidstack’s share price. This particular deal may be full valued – or of course undervalued – but momentum is a real thing. Not just in share prices, where good news can lead to self-fulfilling expectations of higher prices. But also in business itself. That a large games publisher signs on could make other such more interested in signing on.
Recall what it is that Bidstack is really running, it’s a marketplace for placing in-game ads. Like any marketplace the more people who use it then the more people who want to use it. Just as with social media, everyone uses Facebook because everyone’s on Facebook. So too with classified ads – everyone uses Autrotrader because that’s where all the cars are, cars are there because that’s where all the car buyers are.
The same is true of any marketplace. Once volume is achieved then more volume arrives. The buyers arrive because that’s where the sellers are and vice versa. These network effects can be very powerful indeed.
Which way the short-term Bidstack share price will go depends upon everyone else’s opinions about which of these stories is true. The trading position is to be on the right side of those opinions.
Should you invest in Bidstack shares?
Bidstack shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are BIDS shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies