Is Square Enix Being Targeted By Activist Investors For A Hostile Takeover?

There’s some news with bad implications for one of the biggest video game companies in Japan and the world.

Analyst David Gibson shared the news at the start of this week. He said this:

“Activist 3D Investment Partners have revealed a 5. 47% stake in Square Enix will lead to some speculation stock is in play. But 3D work with mgmt… suspect the target will be the ¥237.6bn in cash (US$1.67bn) that Square Enix holds and get them to return to shareholders.”

Dr. Serkan Toto, another analyst that looks at the Japanese video game industry, shared a follow up update on his own Twitter. Dr. Toto said this:

“Square Enix stock just jumped +16.15% (!) on this news today (it’s Wednesday afternoon in Japan). The hope is the activist fund will apply pressure from the outside on Square Enix management to do better in the eyes of shareholders.”

And yes, to make it clear, activists having hopes about this new investor is not necessarily good news. Dr. Toto provided further context:

“They cannot block activists from buying shares, and what these companies usually do is to quietly buy positions before making a big announcement about the stake they now own. These activists of course want to make money, it’s not their mandate to really “help” their targets.”

We suspect some of you were happy about news of activist investors trying to make changes happen in Ubisoft. As we have seen, that’s ended with plans to make a new joint venture with TenCent, that seems to take some control away from the Guillemots in making new games.

Subsequently, some fans were happy to see Sony make a new partnership with Kadokawa, because Kadokawa is the parent company of FromSoftware. Of course, Sony already owned direct shares in FromSoftware. Subsequently, Sony’s investment doesn’t stop FromSoftware from making games on other platforms, even exclusives skipping PlayStation like the Switch 2’s The Duskbloods.

But what’s important to know here is that Square Enix isn’t in the same position that Ubisoft was, that would need a real change in management. A year after the company shifted to a multiplatform strategy, they’re far from being vulnerable in the same way that Ubisoft is. As we pointed out before, recent changes in Japanese laws make it easier for activist investors to make hostile takeovers of Japanese game companies. If these changes were in effect during the Wii U era, one such activist investor could have taken over Nintendo under Satoru Iwata, and we may not have seen Nintendo rally to its most successful era under the Nintendo Switch.

As of right now, we don’t know what 3D Investment Partners is thinking or what plans they have for Square Enix. If we’re lucky, they’re just betting that Square Enix will make money for them. But if not, they may want to make changes that their developers – and fans – want to see.