Skillz Stock Soars on $150 Million Aarki Advertising Acquisition

Embattled Skillz (NYSE:SKLZ) stock is racing higher Wednesday after the mobile games platform provider said it s purchasing online advertising firm Aarki for $150 million, forming the first integrated esports advertising outlet.

The cash and equity deal is slated to close in the third quarter. It s common for acquiring companies to decline on acquisition news, particularly if equity is part of the deal. However, by more than 32 percent at this writing, easily making it one of today s best-performing gaming equities. The name is on pace for its highest close since mid-April.

The highly complementary acquisition will broaden Skillz’s footprint across the rapidly expanding mobile gaming industry by combining its competitive platform with Aarki’s advanced advertising capabilities,” according to a statement issued by San Francisco-based Skillz.

Privately held Aarki, which is also headquartered in the California Bay Area, will function as a division of Skillz when the transaction closes.

Today s move undoubtedly helps. But Skillz still labors 55 percent below its February highs and has been under pressure for several months after three bearish reports two of which were published by unidentified sources .

Among the claims levied against Skillz by the bearish researchers is that the mobile games company engages in accounting gimmickry, that its cash revenue may be less than investors realize, and that customer acquisition costs are too high.

Aarki could allay some of those concerns because the platform reaches 465 million monthly users, which could boost Skillz s customer acquisition capabilities. Additionally, the company s technology capabilities could enhance Skillz s relationships with advertisers, potentially adding to the operator s top line.

“Aarki engages in more than five trillion monthly advertising auctions,” according to the statement. “The company leverages its robust creative services, rich data engines, and proprietary machine learning algorithms to deliver industry-leading ROI for performance advertisers.”

It remains to be seen exactly how the Aarki deal will play out for Skillz and the buyer s shareholders. The aforementioned statement announcing the buy doesn t mention details about the purchase being accretive to earnings or adding to revenue.

However, it may serve another purpose. If Skillz stock can build on today s momentum, bearish traders could be forced to depart the name. As of May 14, 73.18 million shares of the gaming company were sold short, representing 30.88 percent of the firm s total float, according to Dow Jones data.

As has been widely noted, Skillz has the support of some . If they see credible value in the Aarki deal and say so publicly, that could spark the shares higher, potentially putting pressure on short sellers.