Star Wars's prologue begins: One of Ubisoft's minority investors has written an open letter to Ubisoft's board of directors, expressing “deep dissatisfaction with the company's current performance and strategic direction” and threatening a full-scale coup against Ubisoft's founders, the Guillemot brothers, and their backers at Chinese giant Tencent.
In the letter (via GamesIndustry.biz ), Juraj Krupa of Sloakian hedge fund AJ Investments and Partners cites the delays of future installments of Rainbow Six: Siege and The Division, as well as the lowered revenue outlook for Q2 2024, as reasons for shareholders' anger, noting that Ubisoft's share price has fallen more than 40% since last year. Accordingly, Krupa wants the board to “take Ubisoft private or allow it to be sold to a strategic investor,” who would “breathe new life” into Ubisoft's video games by, among other things, making a series of layoffs. They're giving the board 60 days to respond.
AJ Investments is even negotiating with other shareholders in an attempt to oust Guillemots. “They will use French minority law to gather enough shareholders, start a proxy fight and initiate a SALE PROCESS of Ubisoft in order to increase shareholder value for all shareholders.” Krupa specifically wants long-term CEO Yves Guillemot fired.
“The primary reason the valuation is so low compared to its peers is that Ubisoft is currently mismanaged and shareholders are held hostage by Guillemot family members and Tencent, who are exploiting them,” the letter reads. “Management is focused on pleasing investors by beating quarterly results and is not focused on the long-term strategy to deliver an exceptional experience to players.”
AJ Investments appears to be the new kids on the block as Ubisoft minority shareholders. According to Krupa, “We started our Ubisoft position a few weeks ago and we’re still adding to it.” However, they boast that they have “extensive knowledge of the gaming industry” after being a “long-term shareholder in Activision Blizzard.”
“We fail to understand the decision-making process of current management, which has tarnished Ubisoft's reputation among the gaming community by focusing on releasing an average of more than one game per year, instead focusing on delivering hits within a portfolio of unconventional franchises,” Krupa's letter continues. The breakdown of Ubisoft's stance on its games reads like a forum post seething with player comments, to be honest:
“The game that players were eagerly waiting for, Heartland Chapter, was cancelled. Skull and Bones did not launch well, Prince of Persia Lost Crown was okay but not very impressive since no one is talking about it anymore. Rainbow Siege is doing great, yet series like Rayman, Splinter Cell, For Honor, Watch Dogs have been sleeping for years despite being loved by millions of players all over the world. The latest version of Star Wars Outlaws is expected to do well, but recent reviews show that the game is not 100% ready for release despite the world waiting for an open world game in the Star Wars series. It has a Metacritic score of 76% and a IGN score of 7/10, which is a pretty good score in our opinion.”
Krupa, you elegant opportunist, you Machiavellian fool! Forget going toe-to-toe with the Guillemot dynasty – describing 7/10 as “a pretty good score” is how the wars start. Also, you forgot to mention Beyond Good & Evil 2.
There are spicier claims in the paragraph below. Krupa thinks Tencent and the Guillemot brothers' holding company are essentially collaborating to prevent Ubisoft from being acquired by private equity firms like KKR and Blackstone — with Tencent buying a stake in the Guillemot holding company in 2022, and the Guillemots then buying more Ubisoft shares “to prevent any future acquisition or takeover that would make Ubisoft's operations more efficient and agile against its competitors.”
AJ Investments believes that by keeping the stock price low, Tencent and the Guillemot family will be able to buy back stock cheaply and eventually take full control of Ubisoft. Krupa did not say that this was an intentional part of this strategy, but suggested that delaying the games was “beneficial” to Tencent and the Guillemots in this regard.
Hence AJ Investments’ desire to launch a shareholder revolt. Krupa claims that minority shareholders “own approximately 70% of the company,” compared to the roughly 25% held by the Guillemots and Tencent, and therefore “based on our discussions with other shareholders, we believe we have enough voting power to challenge Guillemot’s.” So what would such a takeover and leadership change entail? So what does any major corporate strategic realignment result in these days? You guessed it, more layoffs!
“The company needs to implement significant cost reductions and staff optimization to increase operational efficiency,” Krupa adds. “We also suggest that Ubisoft consider selling certain studios that are no longer needed for the development of core IPs in the portfolio. Ubisoft has more than 30 studios, it is obvious to any investor that this structure is huge for Ubisoft and its future profitability.” “Ubisoft's layoffs in recent years amounted to a cut of about 10% of its workforce, but this is clearly not enough.”
Beyond that, AJ Investments wants Ubisoft's current management out, with Guillemots staying on in an “advisory capacity” alongside a new, more “effective” CEO. They also want Ubisoft to go private because “as a public company, Ubisoft is under constant scrutiny to report better and better quarterly results to please investors, and that could hurt strategy down the road and is hurting Ubisoft right now, when they need to think long-term to breathe new life into their incredible franchise.”
To me, this is all sort of like Aliens vs Predator, except the Alien and Predator are cool movie monsters instead of angry suits fighting over the biggest piece of a billion-dollar corporation. Good luck to all the Ubisoft developers worried about the potential consequences.