Will Ubisoft Go Private as Shares Fall?

Investors pressure Ubisoft to take the company private as its shares continue to fall.

The Company’s Chares Keep Falling

It seems that in recent times, Ubisoft has been undergoing some financial issues that might see the gaming giant become private. The company’s shares have recently been going down on the London Stock Exchange, falling to a 10-year low. This has led investors to express concerns over the direction of the financial situation of the company.

According to a publicly released letter, AJ Investments said that Ubisoft’s shares should be worth about €40-€45 (about $44 to $50). However, as it currently stands, each Ubisoft share hovers around the €14 ($15.50) mark on the London Stock Exchange.

“As a significant minority shareholder in Ubisoft Entertainment via AJ Investments and our partners, we are writing to express our deep dissatisfaction with the current performance and strategic direction of the company,” AJ Investments’ letter states. “Share price of Ubisoft have decreased by more than 40% over the last year, compared to rise of its competitors and indexes.”

Why Are Ubisoft Stocks Falling?

Here, we can only make a brief overview of some of the reasons for Ubisoft’s situation, but it seems that it mostly boils down to the products the company offers and mismanagement as well.

Firstly, Ubisoft’s recently released games have not been very successful. For example, Star Wars Outlaws had a lukewarm reception, scoring just 4.9 user rating out of 10 according to review aggregator Metacritic. This has led to sales of the game being predicted to be slashed by 2 million. It’s expected Ubisoft will sell about 5.5 million units by March 2025. In addition to the sales slashes, Disney has a heavy licensing fee will negatively impact Ubisoft’s income.

But Star Wars Outlaws isn’t the only game that’s been fairing poorly. XDefiant, Ubisoft’s free-to-play hit that firmly contributed to the company’s Q1 financial success, also seems to be in trouble. According to some rumors, the game will lose its much-needed post-launch support if the developers can’t bring back players by the end of Season 3. That being said, Ubisoft has not responded to these allegations.

Ubisoft Suffers from Mismanagement

Unfortunately for the company, it seems that the worsening state of their products isn’t the only reason its stocks are falling. According to the previously mentioned letter, AJ Investments says Ubisoft’s shareholders are “hostages” of Guillemot family members and Tencent.

“Management is focused on pleasing investors with beating quarterly results and not focusing on long-term strategy to provide exceptional experience for the gamers,” AJ Investments states. “Our company has extensive knowledge about the gaming industry and we were longterm shareholder in Activision Blizzard and we started our Ubisoft position couple weeks ago and still adding to it.”

According to the investment fund, Ubisoft should go private with Tencent being a significant partner and shareholder. In addition to that, it wants Ubisoft to “implement a comprehensive cost reduction program and optimize staffing levels to be more comparable with industry leaders.” Lastly, AJ Investments suggested that the company make significant management changes. Chief among these is the removal of CEO Yves Guillemot and finding a new replacement.

Conclusions

It’s rare to see a massive company such as Ubisoft have its shares fall down so low. However, this just goes to show that even large corporations like this are not immune to the turmoil of the market or a bad direction of business.

However, this is by far the end for Ubisoft as the company is simply already too big to fail. While it is very possible that the company will indeed go private and the possible transition may be hard, Ubisoft already has a huge client base, income, and financial reserves. It could likely weather any financial storm that may be headed its way.

But the question about the quality of the games it produces still remains. Ubisoft has a long list of games that have been met with mixed feelings by the wider gaming community, likely contributing to the outflow of income and falling stock prices we are currently seeing.

In addition, both gamers and professionals have, for years, been criticizing some of the marketing strategies that Ubisoft has been implementing. These include shoehorning microtransactions and DLSs into games that, according to many gamers, don’t need them. This has been very often perceived as a cash-grab strategy by many fans.

Ultimately only time will tell which patch Ubisoft will choose and what impact that will have on its products and even the wider gaming market as a whole.