Flying Eagle Acquisition Corp.

FEAC Details

Incorporated as Special Purpose Acquisition Company: Flying Eagle Acquisition Corp. (NASDAQ: FEAC) was incorporated on January 2020 as a blank check company. The company completed its initial public offering in March 2020. FEAC was formed to consummate the business acquisition, asset purchase, business combination with operating entities.

IPO Proceeds: FEAC realized proceeds of $690.0 million from the initial public offering and were placed in Trust Account. As of September 2020, FEAC had $255,827 cash and equivalents and $690.04 million held as non-current investments in Trust Account.

3Q FY20 Result Update: The company generated nil revenues as it had no operations as on September 2020. It earned interest income from funds held in Trust Account and incurred expenses related to start-up costs and management fees.

Key Financial Highlights (Source: Refinitiv, Thomson Reuters) 

Merger Update: FEAC entered into Merger Agreement to acquire Skillz Inc., a mobile gaming company, for $3.5 billion. The Board of Directors unanimously approved the deal. The merger is pending for shareholders’ approval in a special meeting to be held on December 16, 2022. Upon the consummation of the business combination, Flying Eagle Acquisition Corp. will be renamed as “Skillz, Inc.” The transaction is expected to close during Q4 FY20. Upon completion, the company will be traded on NYSE under the ticker “SKLZ”. In connection to this, FEAC filed S-1 with SEC to raise about $212.91 million through private placement.

A Needle on Skillz Performance: Skillz develops a platform for online multiplayer mobile gaming. Skillz reported revenues of $162.4 million during nine months period ending September 2020. It had a gross margin of 95%. Its gross profit grew about 89% to $153.6 million. Net loss increased to $78.5 million in nine months FY20 as compared to $14.9 million reported in the previous corresponding period. Since the onset of the pandemic, Skillz witnessed spike in the consumption of digital entertainment by consumers.

Key Risks: Flying Eagle Acquisition Corp was established to pursue acquisition or business combination opportunities before March 2022. Post that, the company may be liquidated. Any delay in pursuing the deal with Skillz may expose the company to liquidation risk. Acquisition of Skillz may drain resources or dilute exiting investors of FEAC as the company has to raise additional equity or debt financing to fund the deal. 

Stock recommendation: FEAC has rallied in the last few trading sessions and made a new 52-week high of $20.48. The stock outperformed the S&P 500 Index in YTD performance with relative returns of whopping +72.07%. At the closing price of $19.75 on 10 December 2020, FEAC broke the resistance level of $19.621. The stock has support level of $17.852. Considering the merger related news, bright prospects and healthy financials of the proposed target company, we give a “Speculative Buy” recommendation on the stock at the closing price of $19.75, up by 4.77% on 10 December 2020.

FEAC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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