In light of the Star Wars Outlaws developer’s recent string of failures, an investment firm with a minority stake in Ubisoft is demanding that leadership concrete action be taken to save the company – and their fellow shareholders’ money – from its ongoing self-implosion.
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From an ever-growing addiction to microtransactions, to a noted lack of care for their finished products, to the game play in nearly all their titles devolving into ‘climb a tower to unlock a portion of the map, do a fetch quest, repeat’, recent years have seen Ubisoft devolve from a relatively well-liked developer into a poster child for the Western video game industry’s ongoing decline.
And thanks to being the studio’s most recent release, no other game encapsulates the studio’s terrible decision making than Star Wars Outlaws.
Its gameplay feeling just as outdated as its PS2-level graphics and technical optimization, Outlaws is so objectively boring that even after numerous mainstream critics and influencers were wined-and-dined-and-given-a-VIP-tour-of-Disneyland by Ubisoft, the best opinion they could muster towards the game was a collective ‘meh‘.
In further compounding the game’s struggles, given this reception, J.P Morgan downgraded their sales expectations for the game, slashing their predictions from 7.5 million units sold in the fiscal year to just 5.5 million.
As a result of these developments, September 9th saw Ubisoft’s stock fall by €1.05, its final price sitting at an abysmal €13.67 by the time France’s Euronext Paris securities market closed for the day – an over 50% drop compared to this same time last year.
(It should be noted that while some outlets and pundits have taken to declaring that this stock price represents a “10-year low” for the studio, this is not the case, as Ubisoft’s stock did not rise above its current €13.67 price point until November 2014).
Unhappy with these results and fearing for his firm’s minority stake in the company, AJ Investments and Partners founder and company executive Juraj Krupa issued a public letter expressing “our deep dissatisfaction with the current performance and strategic direction of the company” and calling for its leadership to “take Ubisoft private or allow it to [to be sold] to [a] strategic investor”.
“We believe that Ubisoft at current valuation is deeply undervalued and should be worth between 40-45 EUR per share,” said Krupa, whose firm holds a less-than-1% stake in the company. “The main reason why the valuation is so low compared to the peers is that Ubisoft at current state is mismanaged and shareholders are hostages of Guillemot family members and Tencent who take advantage of them. Management is focused on pleasing investors with beating quarterly results and not focusing on long-term strategy to provide exceptional experience for the gamers. 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. We cannot understand the decision-making process of current management that is focused on releasing multiple average games per year that are harming Ubisoft’s reputation among gamers community instead of focusing to provide hit games within its exceptional franchise portfolio.”
To this end, the investor then put forth four proposals which he believed would help right Ubisoft’s sinking, AAAA-level ship, including:
- Take the Company Private for fair price: We urge the Board to consider taking Ubisoft private, with Tencent as a significant partner and shareholder. Ubisoft as a public company is under ongoing scrutiny to report better and better quarterly results to please investors which may harm strategy going forward and is harming Ubisoft at this time, when they need to think long-term to get new air into their exceptional franchises. This would allow the company to address its issues away from the public market pressures and make necessary changes without harming minority shareholders, retail investors, and pension funds that are victims of these efficiency problems and mismanagement by current leadership. If Guillemot and Tencent are not interested in Ubisoft value, we urge the current management not to block any takeover as there are several PE groups that would be interested, based on our research. In the event of offer from a PE group or strategic investor, we urge Guillemot family to accept this bid, when this bid will be for fair price, if this offer won’t be accepted we will sue for a reimbursement of damages.
- Cost Reduction and Staff Optimization: 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. This move will raise cash at Ubisoft and lower its debt and become more effective and efficient on day to day basis
- Focus on Core IPs: Concentrate resources and execution on the development of core IPs that have proven to generate the majority of Ubisoft’s revenue. Titles like Rainbow Six Siege, Assassin’s Creed, Far Cry, Watch Dogs, and Tom Clancy’s titles such Sprintel Cell should be prioritized and cherished, ensuring they maintain their market-leading positions.
- Management Changes: Re-evaluate the current management team and governance structure. It is crucial to have a leadership team that is capable of driving the company forward and delivering shareholder value. Consider hiring new CEO who would run Ubisoft more efficiently who has proven record of running companies such Ubisoft. Obviously, advisory by Guillemot Brothers will be needed.
“We urge the Board to consider our proposals seriously within next 60 days and act in the best interest of the company and its shareholders,” Krupa ultimately asserted. “If we do not receive any reply, we will get together with other minority shareholders who share our views and make bigger push against Ubisoft management according to the French minority shareholder law. We are in contact with institutional and retail investors of Ubisoft to act together the increase value for all shareholders. Our shareholder group has requested meeting with the current management.”
“French and EU law provides comprehensive legal framework for the protection of minority shareholders and the resolution of situation of abuse of dominant position by controlling shareholders,” he concluded. “As a minority shareholder together with others, we will use all legal possibilities to achieve our goal.”
