Unity Software in Talks to Spin Off China Unit

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Unity Software ($NYSE:U) is in talks to spin off its China unit to power expansion, Reuters reports. That would come through strategic investors into a business valued over $1B, according to the report. It could also provide a boost to the company’s earnings, as the Chinese market is currently undervalued compared to other markets.

However, it is not clear how this move will affect Unity Software’s share price in the long term.

Market Reaction

A sale would allow Unity to focus on its core business and continue to grow in other markets outside of China. Unity’s China business has been a source of growth for the company in recent years, but the market is becoming increasingly competitive. A spin-off would allow Unity to compete more effectively in China while also freeing up resources to invest in other areas. No formal decisions have been made at this time and it is unclear when or if a deal will be reached.

However, the mere fact that talks are taking place is a positive sign for Unity shareholders.

VI Analysis

Company’s fundamentals reflect its long term potential, below analysis on UNITY SOFTWARE are made simple by VI app.

VI Star Chart shows that UNITY SOFTWARE is strong in growth, medium in asset and weak in profitability, dividend.

UNITY SOFTWARE has an intermediate health score of 4/10 with regard to its cashflows and debt, might be able to sustain future operations in times of crisis.

UNITY SOFTWARE is classified as ‘cheetah’, a type of company that achieved high revenue or earnings growth but is considered less stable due to lower profitability. At the right price, it is suitable for those who wants to invest for high capital gains. High growth companies are deemed more volatile as they attempt to grow faster.

Summary

The news sent Unity’s stock up 5.2% the following day. Unity has been expanding its presence in China in recent years, and the spin-off would allow the company to focus on its core business while still tap into the growing Chinese market. Unity’s China business includes a joint venture with Internet giant Tencent, which owns a minority stake in the company. The move would also be a boon for shareholders, as it would likely increase Unity’s valuation and make it more attractive to potential investors. Unity’s stock has already seen a significant uptick this year, and a spin-off of its China business could help drive even more growth.