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Shares of Ubisoft Entertainment (UBSFF) surged by 33.51%, closing at $15.63 on October 4, 2024, following reports that Tencent and the Guillemot family are considering a potential buyout. The French video game publisher saw its stock soar after Bloomberg News reported that both Tencent and Ubisoft’s founding family are exploring buyout options as the company has experienced a significant decline in its market value this year.
Possible Buyout Scenario
One of the options being discussed is a joint effort by Tencent and the Guillemot family to take Ubisoft private. This would involve consolidating their current minority shares into a larger controlling stake. The report further noted that this is just one among various possibilities under consideration.
Neither Ubisoft nor Tencent provided comments on the report, as Ubisoft declined to address it, and Tencent was not immediately available.
Challenges & Industry Trends
The significant price surge comes amid a turbulent period for Ubisoft, which has faced concerns from investors over its game lineup and overall company management. The company has had to delay the release of its upcoming “Assassin’s Creed Shadows” game to February 2025, following less-than-expected demand for its recent “Star Wars Outlaws” release. Consequently, Ubisoft adjusted its net bookings guidance for the 2025 fiscal year to 1.95 billion euros, a decrease from the 2.32 billion euros reported for the 2024 fiscal year.
Additionally, activist investor AJ Investments, with a less than 1% stake in Ubisoft, has voiced its desire for changes in company management, suggesting the company should sell itself to private equity or a firm like Tencent.
Broader Industry Pressures
Ubisoft’s challenges are reflective of a larger trend within the gaming industry. The global games market growth is predicted to slow down to 2.1% year-over-year in 2024, a marked contrast to the rapid growth experienced during the 2020 and 2021 pandemic years. According to technology analyst James Lockyer of Peel Hunt, a U.K. investment bank, a contributing factor is that gamers are increasingly dedicating their time to older games, reducing demand for new titles.
The current speculation and strategic challenges highlight a pivotal moment for Ubisoft as it contemplates potential changes in ownership and strategy in response to evolving market dynamics.