Ubisoft is both one of the biggest and most successful video game companies in the world, and one of the most controversial, and facing its most uncertain times.
If you’re a gamer who follows news in the industry closely, you would be well acquainted with Ubisoft’s struggles with mismanaging their video game pipeline, and also the serious claims of a toxic workplace in the company. Allegations go as far up as the Guillemot family themselves, and the company is already facing litigation.
Those allegations are definitely related to the company’s mismanagement issues, and now it looks like Ubisoft’s investors are losing patience with the current management.
Juraj Krupa of AJ Investments, a minority owner in Ubisoft, has just made public an open letter addressed to the company’s shareholders. The letter starts by pointing out that they have been a successful investor in Activision Blizzard in the past, and they are well versed in the investments business of video games.
Krupa says that Ubisoft is failing to unlock the company’s true value because of their mismanagement. We think most gamers will agree with them here, because we feel it in the poor state of games like Skull and Bones and Star Wars: Outlaws when they launched this year.
Krupa then accuses the Guillemots and Tencent of blocking attempts to enter new business investments for Ubisoft. They cite KKR and Blackstone for expressing an interest in acquiring the company in 2022. Because of existing agreements between Tencent and the Guillemots, those inquiries went nowhere.
Krupa then makes quite a dramatic accusation that should alarm everyone, not just their investors. He says that the Guillemots have colluded with majority shareholder Tencent to slowly get back ownership of the company.
He specifically says that in September 2022, Guillemot’s holding company sold shares to Tencent at € 80 per share, and then bought shares back from Tencent at € 19 per share a few months later.
If you look back at the accusations that Ubisoft’s management and the Guillemots are facing, it’s hard to see Guillemot regaining control of the company as a good thing. So these accusations are quite serious, particularly against Tencent.
We imagine most gamers won’t like Krupa’s proposal for how to fix Ubisoft’s ongoing woes. Most outlets stuck to the proposal to make the company private, but that’s a relatively minor suggestion. What AJ Investments really wants to do is change Ubisoft’s management, institute cost reduction, and if possible, allow new investors to take over the company.
Regarding cost reduction, we’ll quote the letter verbatim:
“Implement a comprehensive cost reduction program and optimize staffing levels to be more comparable with industry leaders. This will involve difficult decisions but is necessary to ensure long-term viability and competitiveness.
We are aware of the layoffs that Ubisoft has made in the recent years which accounted to approximately of 10% cut of workforce but that is simply not enough. We are aware that Ubisoft announced strategy to cut fixed costs by 150m EUR by 2024 and 200m EUR by 2025, but we still think this is not aggressive enough to stay competitive in the global landscape where Ubisoft operates.
As part of this effort, Ubisoft should consider selling its studios that possess talent but are focused on non-core games, thereby allowing Ubisoft to streamline operations and focus on its main IPs.”
Now, this is not to say that Ubisoft employees are safer under the Guillemots. We reported on rumors that the XDefiant team is under pressure to increase metrics last month. But we know better than to believe those smaller studios will conveniently find buyers.
While this is happening, Ubisoft’s market performance is currently a bloodbath. Dr. Serkan Toto revealed that their shares lost 10 % of value in the two days before September 3. A few hours ago, he revealed that stocks have dropped another 9 %. Ubisoft’s market cap is now down to $ 1.9 billion.
If it seemed that Ubisoft’s fortunes were uncertain for a few years, it now appears that the company is in a crucial point. Investors may succeed at ousting the Guillemots out of power in some way, or the Guillemots may survive such an attempt.
Somehow, we believe the behind the scenes of Ubisoft in the coming weeks will be filled with more drama than their recent game releases.
