Ubisoft: Guillemot's terrible Fall in Disgrace

18 בספט׳

Ubisoft is recently facing a series of challenges. Along with other video game companies such as Epic Games and Electronic Arts, Ubisoft has been the subject of a complaint by the European Consumers' Organization (BEUC). The complaint alleges that these companies mislead gamers, especially children, by selling virtual currencies in games, leading to excessive spending and hiding the real cost of digital items. BEUC urges regulators to take action against these practices. Video Games Europe, which represents the companies singled out, defends these practices, assuring that they comply with European laws and the PEGI Code of Conduct.

At the same time, Ubisoft faces a fall in the value of its shares after the very disappointing reception of “Star Wars Outlaws”, failing to meet investors' expectations, compared to games from other houses such as “Space Marine 2: Warhammer 40k” which sold more than 400,000 copies in the month of release. The game, which was key to the company's financial recovery after four years of negative cash flows, received a low user score on Metacritic, which has caused Ubisoft's stock to hit its lowest level since 2015. This is on top of the poor reception of another recent release, “Xdefiant,” negatively impacting sales expectations. The long-awaited “Skull & Bones,” which relied on French government subsidies and resulted in another broken title, also passed without much fanfare. One of the keys to their fall from grace is the replication of the “Assasin's Creed” model in everything they have done and the franchise's extension of that model of stretching the model until it no longer works. These failures are only a reflection of an overly commercialized and repetitive model where consumers of video games barely have to think and repeat mechanics over and over again, and all video games generate the idea of playing the same video game over and over again. The insertion of absurd mechanics without utility has been another of the failures of the latest Starwars game, which have finally disappointed players despite being a franchise that in “theory” should sell by itself due to its renown.

In the midst of these difficulties, and a complaint requesting his resignation as CEO, the Guillemot family, founder of Ubisoft, is considering buying the entire company to avoid selling it to third parties. Despite rumors of interest from firms such as Blackstone Inc. and KKR & Co, the Guillemots plan to maintain control to avoid a hostile takeover. They currently own 15.9% of the shares and 22.3% with voting rights, and are looking to partner with a private equity firm to acquire the remainder.
These moves reflect the family's strategy to retain control of Ubisoft at a time of significant challenges.

If we look at the UBI.FR chart it shows us the commented a continued slump since July 2018, a recovery zone in December 2021 and since then the firm has not stopped falling in results. If we look at the economic data the 2018 profit peak was given by an increase in gross and net profit higher than the previous year (+139.452M). From there, although the company has had a high profit decline and in 2021 presented a balance in positive, returning again to present the following years losses. This 2024 , the company presented a balance in the first part of the year positive (+157.8M) compared to a terrible 2023 in results (-494.2M). And seeing the current news about the current games, it is foreseeable a continuation of the fall if the data of the new games do not present better sales results, which could make the company fall to the zone of 10 euros per share or even end up being taken off the stock exchange or acquired by another market giant interested in its products as could be Microsoft. Microsoft must wait at least until 2033 to be able to acquire Ubisoft because during the merger of Activision, Blizzard and King, within the structural measures proposed by Microsoft's lawyers to comply with British antitrust regulations, it highlighted its promise not to buy Ubisoft, following the CMA's approval of Microsoft. Therefore, in the short term, it only seems viable for Ubisoft to be acquired by other competitors or to be taken out of the market, if it continues to be negative.

Ion Jauregui - Analyst Activtrades






*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.

All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.

Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acing on the information provided does so at their own risk.