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Concept
Pure play
Summary
A pure play company focuses solely on a particular product or activity. Investing in a pure play company can be considered as investing in a particular commodity or product of a company.
Pure play firms either specialize in a specific niche, or have little to no vertical integration. For example, a coffee shop may call itself a "pure play" restaurant, and a factory that only produces goods (not designing or selling to consumers) may refer to itself as a pure play manufactory.
E-commerce companies are often referred to as pure play retailers, as they sell only through the Internet.
In finance, the "pure play method" is an approach used to estimate the cost of equity capital of private companies, which involves examining the beta coefficient of other public and single focused companies. See also Hamada's equation.
Here, when estimating a private company A's equity beta coefficient, the equity beta coefficient of a public company B is needed; the latter can be calculated by regressing the return on B's stock on the return on the relevant stock index. The following calculation is then applied to return the beta coefficient of company A.
Unlevered Beta of B = Equity Beta of B / (1 + DEB × (1 − Tax RateB))
Equity Beta A = Unlevered Beta of B × (1 + DEA × (1 − Tax RateA))
where DEA and DEB are the debt to equity ratios of company A and B respectively.
Pure play foundries, such as TSMC and GlobalFoundries, have no in-house design capabilities, and fabricate integrated circuits (ICs) for fabless semiconductor companies, such as Qualcomm, Broadcom, Xilinx, Nvidia, among others. Integrated device manufacturer (IDM) foundries, such as Intel, IBM, NEC, Texas Instruments and Samsung, provide both foundry design services and IC fabrication.
Compared to traditional retail stores, pure play e-retailers can serve a wider audience without physical boundaries and distance, and may target specific customer groups without the high cost of obtaining information from these groups.
Official source
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