NERD ETF Co-Founder Talks Tencent, Sea Limited, Foreign Gaming Stocks

The Roundhill BITKRAFT Esports & Digital Entertainment ETF NERD owns stocks from 13 countries, including some that trade on exchanges outside of the United States.

Benzinga spoke to Roundhill Investments Co-Founder Will Hershey to get his thoughts on the global esports market. 

“When you look at the world of gaming and esports, it’s very much [of] a global nature,” Hershey said, adding that China and South Korea are leaders in the esports market.

Tencent Offers Great Exposure: Despite running a gaming ETF, Hershey said Tencent Holdings TCEHY is a “mini-gaming ETF.”

Tencent owns Riot Games, the creators of the world’s most popular game, “League of Legends,” and also owns a stake in “Fortnite” creator Epic Games. Tencent offers a diversified investment, Hershey said. 

Tencent is also helping major gaming companies convert AAA titles to mobile and become playable and exciting.

This includes the recent launch of “Call of Duty Mobile” in China, in a partnership between Activision Blizzard ATVI and Tencent.

Sea Limited's 2020 Run: One of the best-performing gaming stocks in 2020 is Sea Limited SE, with shares up over 300% year-to-date.

The company has roots in gaming and digital entertainment and has leveraged that audience into verticals like e-commerce and fintech.

Hershey said this is part of the reason for the higher valuation.

“Sea really paved the way for other gaming companies to follow this model," he said. 

Sea’s success in the gaming and esports market is based mainly on one game: “Free Fire.”

“[It's] the world’s most popular game that no one has ever heard of,” Hershey said. 

“Free Fire” is popular in Asia thanks to its playability on low-end smartphones and has become a strong esports property. 

Related Link: Tencent Passes Alibaba As Most Valuable Chinese Company

Unknown Foreign Names: Some lesser known gaming-related companies that are in the Roundhill Esports ETF include Modern Times Group, a Swedish company in the live esports events market, and Razer, the maker of gaming peripherals like keyboards and computer mice.

Another company, Enthusiast Gaming, is trading in Canada and planning an uplisting to the Nasdaq in the U.S.

Companies that have undertaken uplistings have seen increased valuations, Hershey said.

He called Enthusiast “interesting” and pointed to its ownership of Luminosity, one of the most popular esports teams and former home of Ninja.

Enthusiast has over 300 million users and counts advertising as its main revenue source.

China's Streaming Market: Two of the largest streaming companies in China, Huya Inc HUYA and Douyu International Holdings DOYU, are merging.

The combined company, which will be valued at $10 billion and have annual revenue of $4 billion, faces some antitrust concerns to get the deal done, Hershey said — but will be a real winner if approved. 

“I’d also look for this combined company to really be a powerhouse outside of China as well,” Hershey said.

It will be interesting to see if the company can compete with Amazon.com AMZN-owned Twitch in the U.S., the Roundhill CEO said.