2024-10-05
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ubisoft, a major french aaa game company with a history of nearly 40 years, is experiencing a "midlife crisis". the company has recently been eager to explore various ways to restore confidence in the capital market.
last month, ubisoft's stock price fell to its lowest point in a decade as investors' expectations for the company's game product line and financial prospects were bleak, and its market value has evaporated by more than half in the past year to less than $2 billion. in comparison, the market value of domestic game manufacturer sanqi interactive entertainment is close to 40 billion yuan. in the united states, game majors ea and take-two have a market value of approximately us$26 billion.
activist investors push for ubisoft sale
on october 4, local time, it was reported that the guillemot brothers co., ltd., the founding family of ubisoft, and shareholder tencent were considering multiple options, including seeking to sell the french video game developer to tencent. the news boosted ubisoft's stock price to soar more than 30% that day, setting the largest single-day rise in history.
activist investor aj investment, which holds about 1% of ubisoft's shares, recently stated in an open letter that it is working with other ubisoft shareholders to promote the sale of ubisoft to private equity companies or chinese gaming giant tencent.
china business news reporter asked ubisoft co-founder and ceo yves guillemot to confirm this information, but as of press time, no response had been received. due to the chinese holidays, tencent has not yet made a statement.
an industry insider close to ubisoft told china business news: "these negotiations are still in the early stages, and it is not yet certain what kind of deal will be reached, but ubisoft's pursuit of stabilizing the company's stock price and increasing its value is unswerving. it will change."
according to ubisoft's latest annual report, as of the end of april this year, tencent held 9.2% of ubisoft's net voting rights, and the guillemot family held approximately 20.5% of ubisoft's voting rights.
in 2022, tencent invested 300 million euros to acquire 49.9% of the shares of guillemot brothers co., ltd., becoming ubisoft's largest external single shareholder. at that time, the transaction valued ubisoft at us$10 billion.
after tencent took a stake in ubisoft, ubisoft's stock price began to plummet. although the guillemot family has repeatedly emphasized that it will remain independent, tencent is not allowed to increase its shareholding by more than 9.99% within 8 years and does not have any business veto power. however, the capital market believes that tencent’s increase in holdings has greatly weakened ubisoft’s attractiveness to speculative capital. because tencent's investment deepens the guillemot family's control over ubisoft, making it difficult for other external capital to enter.
aj investments stated that ubisoft missed a valuable opportunity to reorganize and change through acquisitions, causing the stock price to plummet and shareholders to suffer losses. to this end, the agency is pushing other shareholders to put pressure on ubisoft, including taking steps such as taking it private and possibly electing board members and executives to replace current management.
according to sources quoted by aj investments, investment companies such as blackstone group and kkr have expressed their intention to acquire ubisoft, but were rejected.
but the guillemot family is unlikely to give up control of ubisoft.about 10 years ago, ubisoft was involved in a battle with the hostile takeover giant vivendi. in the end, vivendi withdrew and the guillemot family won a great victory. since then, the guillemot family has further strengthened its core stake in ubisoft by expanding its cooperation with tencent. yves guillemot told china business news at the time: "tencent joined the investment consortium of ubisoft founders to provide a stable foundation for the company's long-term development."
trying to get rid of the "midlife crisis"
as the developer of the top 3a game "assassin's creed" series, ubisoft, which has been established for nearly 40 years, is experiencing a "midlife crisis." the company recently lowered its guidance for the 2024-2025 fiscal year, expecting net bookings to fall to approximately 1.95 billion euros, with second-quarter net bookings expected to be 350 million to 370 million euros, down from the previous forecast of 500 million euros. .
lower-than-expected game sales were the main reason ubisoft lowered its financial guidance. additionally, the highly anticipated assassin's creed: shadows game will also be delayed. ubisoft has delayed the game's release by three months to february 14, 2025. sales of star wars: outlaws, another blockbuster game released this summer, have also been disappointing.
"given recent challenges, we recognize the need to improve efficiency while satisfying our players," yves guillemot said in a recent statement. he also said the company's executive committee was initiating a review to further improve its execution.
ubisoft's bloated corporate size has led to inefficiencies.public information shows that ubisoft has nearly 20,000 employees and has established dozens of game studios around the world. a company of this scale is extremely rare in the game industry. although ubisoft has also streamlined its personnel in recent years, laying off nearly 2,000 people worldwide in the past two years, it is still far higher than its peers. in comparison, ea and take-two have only about 10,000 employees. from the perspective of human efficiency, ubisoft's human efficiency is the lowest and it is still losing money.
ubisoft is also known as the "whampoa military academy" in the gaming industry in china, but many senior game professionals who have worked at ubisoft told china business news that most of ubisoft's domestic senior people are gone."the company is still operating normally, and various games are being developed as usual, but the appeal seems to be not as attractive as before." a former ubisoft china employee told china business news.
ubisoft's woes also partly reflect the downturn facing the global video game industry. according to data from research company newzoo, the global game market is expected to grow by only about 2% year-on-year in 2024, far less than the levels during the new crown epidemic in 2020 and 2021.
james lockyer, a technical research analyst at british investment bank peel hunt, said that part of the problem facing game publishers today is that gamers are spending more time on old games rather than new ones.
"there are not many exciting new games, and everyone is slowly getting tired of the old games, which has led to a relatively fragmented situation in the entire industry." a former senior tencent games executive told china business news.
on the other hand, in recent years, the number of games released annually around the world has increased significantly, which also means that consumers have more choices and funds are more dispersed. as a result, the revenue and return on investment of these games are often lower than expected.