When the Chinese giant Tencent strengthened its stake in Ubisoft, known for Assassin’s Creed, Far Cry, Just Dance or Splinter Cell, the title fell on the stock market.
Why is Ubisoft stock plunging? Will Tencent’s rise in Ubisoft’s capital boost the video game publisher’s operations? Is it the right time to buy Ubisoft shares?
ActiveTrades analyzes investment opportunities for the French video game giant.
Tencent is finally in the first position to buy Ubisoft
On Tuesday, September 8, Ubisoft announced in a press release “ Acquisition by Tencent of a passive minority stake in Guillemot Brothers Ltd », the main shareholder of Ubisoft with more than 13% of the capital and more than 17% of the voting rights.
The Chinese company’s large investment of 300 million euros brings its stake to 49.9% of the capital and 5% of the voting rights of the Guillemot family’s holding company. Thus, Tencent strengthens its partnership with the French video game champion and further expands its influence.
However, the deal does not change much from the perspective of the company’s current governance, as Tencent’s room for maneuver is limited. It is indeed still the Guillemot family that heads the company.
Well, for now…
The agreement actually stipulates that the holding company should control the company for another 8 years, since Tencent cannot increase its stake in the video game company to more than 9.99% of the capital and voting rights before the 8-year period expires. .
Ubisoft stock falls
Although the operation valued Ubisoft’s shares at €80 (versus around €43 before the news broke), Ubisoft’s share price fell by around 20% following the news. At the time of writing this article it is going down to just under €36.
Ubisoft share price daily chart
Source: ActiveTrader Broker ActiveTrades online platform
The plunge in Ubisoft’s share price is largely due to the fact that it is now losing its speculative character. Many investors actually anticipated a hostile takeover of the French company when the video game market was in full consolidation.
Since the beginning of 2022, the content war and the need for a new economic model have indeed led to numerous announcements of acquisitions and takeovers:
- American publisher Take-Two has bought the creator of mobile game Zinger, best known for FarmVille, for US$12.7 billion.
- Microsoft bought Activision Blizzard, the holder of cult licenses like Call of Duty or Warcraft, for about $69 billion.
- Sony has offered itself to Bungie, known especially for its popular Destiny license, for US$3.6 billion.
- Chinese giant NetEase has acquired tricolor video game development studio Quantic Dream, best known for Detroit: Become Human, Heavy Rain or Beyond: Two Souls.
Is it the right time to buy Ubisoft stock?
Tencent’s rise in Ubisoft’s capital will allow it to implement some strategies that could be beneficial to Ubisoft’s growth and, by extension, its share price.
Tencent will help the French bring their most popular franchise to the mobile gaming market. This market has been one of the fastest growing video game submarkets since the Covid crisis.
It is a strong market in Asian countries with China number 1. The introduction of the Ubisoft license to the Chinese market is also in the program of the alliance between Tencent and Ubisoft. The Chinese giant actually plans to help the French launch several titles in China.
Finally, the alliance of these two companies will allow joint work to take video games to a whole new level on offer to create more immersive gaming experiences, especially thanks to Metaverse.
For the ActivTrades team, this strategic partnership between Tencent and Ubisoft therefore promises positive synergies and numerous opportunities and growth drivers for the video game giant. The latter could thus support the French giant’s stock market value over time.
Additionally, Ubisoft’s share price valuation is relatively low compared to its competitors, especially those present in the American market.
However, it would appear that the company must face some challenges before regaining investor confidence.
Image source: Freepik
All of our information is, by nature, generic. They do not take into account your personal circumstances and do not in any way constitute personalized recommendations with a view to executing transactions and cannot be assimilated into financial investment advisory services, or provide any incentive to buy or sell instruments. financial The reader is solely responsible for the use of the information provided without any recourse against the publishing company of Cafedelabourse.com. The publisher of Cafedelabourse.com shall not be held liable for any errors, omissions or inappropriate investments.