Ubisoft, a major French AAA game developer with nearly 40 years of history, is facing a "midlife crisis," and the company is urgently exploring various avenues to revive confidence in the capital market. Due to investors' bleak expectations for the company's game product line and financial prospects, Ubisoft's stock price fell to its lowest point in ten years last month. Over the past year, the market value has evaporated by more than half, and it is now less than 2 billion US dollars. In contrast, the market value of the domestic game company 37 Interactive Entertainment is close to 40 billion yuan. In the United States, major game companies like EA and Take-Two have a market value of about 26 billion US dollars.

Aggressive investors are pushing for the sale of Ubisoft. On October 4th, local time, it was reported that the founding Guillemot family's Guillemot Brothers Limited and shareholder Tencent were considering various options, including seeking to sell the French video game developer to Tencent. The news boosted Ubisoft's stock price, which soared by more than 30% at the close, setting a record for the largest single-day increase in history.

AJ Investment, an aggressive investor holding about 1% of Ubisoft's shares, recently stated in an open letter that it is working with other Ubisoft shareholders to promote the sale of Ubisoft to a private equity firm or the Chinese gaming giant Tencent.

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A reporter from First Financial Daily sought confirmation from Yves Guillemot, co-founder and CEO of Ubisoft, but had not received a response by the time of publication. Due to the Chinese holiday, Tencent has also not yet made a statement.

An industry insider close to Ubisoft said, "These negotiations are still in the early stages, and it is not yet possible to determine what kind of deal will ultimately be reached, but Ubisoft's pursuit of stabilizing the company's stock price and increasing its value will not change."

According to Ubisoft's latest annual report, as of the end of April this year, Tencent holds 9.2% of Ubisoft's net voting rights, and the Guillemot family holds about 20.5% of Ubisoft's voting rights.

In 2022, Tencent invested 300 million euros to acquire 49.9% of the shares of Guillemot Brothers Limited, becoming Ubisoft's largest single external shareholder. At that time, the transaction valued Ubisoft at 10 billion US dollars.

After Tencent's shareholding in Ubisoft, Ubisoft's stock price began to plummet. Although the Guillemot family repeatedly emphasized that it would remain independent, Tencent is not allowed to increase its shareholding to more than 9.99% within 8 years and does not have any business veto rights. However, the capital market believes that Tencent's increase in holdings has greatly weakened Ubisoft's attractiveness to speculative capital. Because Tencent's shareholding has deepened the Guillemot family's control over Ubisoft, making it difficult for other external capital to enter.AJ Investments has stated that Ubisoft has missed a valuable opportunity to restructure and transform through acquisitions, leading to a significant drop in stock prices and losses for shareholders. As a result, the organization is urging other shareholders to put pressure on Ubisoft, including measures such as privatization, and may elect board members and executives to replace the current management.

According to AJ Investments, investment firms such as Blackstone Group and KKR have expressed interest in acquiring Ubisoft, but were rejected.

However, the Guillemot family is expected to be reluctant to relinquish control over Ubisoft. About a decade ago, Ubisoft was embroiled in a struggle with the hostile takeover giant Vivendi Group, ultimately emerging victorious as Vivendi retreated. Since then, by expanding its cooperation with Tencent, the Guillemot family has further strengthened its core equity in Ubisoft. Yves Guillemot stated to the First Financial Daily reporter at the time: "Tencent joined the Ubisoft Founders' Investment Consortium, providing a stable foundation for the company's long-term development."

Struggling to Escape the "Midlife Crisis"

As the developer of the top-tier AAA game series "Assassin's Creed," Ubisoft, which has been established for nearly 40 years, is facing a "midlife crisis." The company recently downgraded its guidance for the fiscal year 2024-2025, expecting net bookings to drop to approximately 1.95 billion euros, with net bookings for the second fiscal quarter projected to be between 350 million and 370 million euros, lower than the previously expected 500 million euros.

Lower than expected game sales are the main reason for Ubisoft's downgraded financial guidance. In addition, the highly anticipated game "Assassin's Creed: Shadow" has also been delayed. Ubisoft has postponed the release of the game by three months to February 14, 2025. The sales performance of another major game released this summer, "Star Wars: Outlaws," has also been disappointing.

"In light of recent challenges, we recognize the need to improve efficiency while meeting player expectations," Yves Guillemot said in a recent statement. He also mentioned that the company's executive committee is initiating a review to further enhance its execution capabilities.

Ubisoft's bloated corporate size leads to low efficiency. Public information shows that Ubisoft has nearly 20,000 employees and has established dozens of game studios worldwide, a scale that is extremely rare in the gaming industry. Although Ubisoft has also streamlined its workforce in recent years, with nearly 2,000 layoffs globally in the past two years, it still far exceeds its peers. In comparison, EA and Take-Two have about 10,000 employees each. In terms of employee efficiency, Ubisoft has the lowest efficiency and is still incurring losses.

Ubisoft is also known domestically as the "Whampoa Military Academy" of the gaming industry, but several senior game professionals who have worked at Ubisoft told the First Financial Daily reporter that most of the senior talent in China has left. "The company is still operating normally, and various games are being developed as usual, but the appeal seems not as strong as before," said a former Ubisoft China employee to the First Financial Daily reporter.

Ubisoft's predicament also partially reflects the downturn faced by the global video game industry. Data from research firm Newzoo shows that the global gaming market is expected to grow by only about 2% in 2024, far below the levels during the COVID-19 pandemic in 2020 and 2021.James Lockyer, a technology research analyst at British investment bank Peel Hunt, stated that part of the problem game publishers are facing now is that gamers are spending more time on older games rather than new ones. "There are not many new exciting games, and people are gradually getting tired of the old ones, leading to a more fragmented situation in the entire industry," a former senior executive of Tencent Games told First Financial Daily reporters.

On the other hand, in the years following the COVID-19 pandemic, the number of games released globally each year has increased significantly. This also means that consumers have more choices, and the dispersion of funds leads to these games' revenue and return on investment often being lower than expected.