She has been a giant in the world of video games, but her latest years have been some of the worst in her history. The crisis of Ubisoft not only has not ended yet, but it is starting to resemble a TV series. AJ Investments, a minority investor group that handles around 1% of the company’s shares, has initiated a rebellion against the major shareholders of the company. They claim that the current management is disastrous and threaten to take action soon if significant changes are not made. Although it may seem like a trivial incident, a similar movement changed the history of video games.
A revolution within Ubisoft
Explaining the frustration of Ubisoft’s shareholders is simple. The value of the company’s shares has decreased by 89% since July 20, 2018. A slow but steady decline that has made the company an anomaly in the video game industry. While the shares of companies like EA or Take-Two trade around 140 euros, those of the French company have dropped to costing less than 14. To this dire situation, an equally or even more alarming problem must be added: there is nothing that hints at a great change in the future.
In this sense, AJ Investmenst’s reading has been harsh. “Ubisoft is poorly managed and shareholders are hostages of both the Guillemot family and Tencent, who take advantage of us. The leadership focuses on pleasing investors by achieving quarterly results, but has no long-term strategy to provide great experiences for players (…) We are unable to understand the decision-making process of the current leaders, who focus on releasing many mediocre games every year that are ruining Ubisoft’s reputation instead of offering great titles from its exceptional franchise catalog.”
AJ Investments doesn’t believe that releases like Skull and Bones help Ubisoft.
In addition to these problems, investors also point out that Ubisoft has acted irresponsibly due to its massive number of employees, which, they argue, makes it almost impossible to make a profit. “The company needs to significantly reduce costs and optimize its personnel structure to improve operational efficiency. We also suggest selling certain studios that are not necessary for the development of the main intellectual properties of the catalog. Ubisoft has more than 30 studios. It is obvious to any investor that the structure is too large to be profitable.”
In addition to these proposals, AJ Investments recommends that Ubisoft focus on its main intellectual properties: “Games like Rainbow Six Siege, Assassin’s Creed, Far Cry, Watch Dogs, and Tom Clancy’s titles like Splinter Cell should be prioritized to maintain their leadership positions in the market.” At one point in their statement, they also mentioned their disbelief at seeing “franchises like Rayman, Splinter Cell, For Honor, or Watch Dogs dormant for years despite being loved by fans worldwide.”
Ultimately, they seem to offer the company three options…
- Privatization: In this scenario, the company would no longer operate on the stock market. It could happen if, for example, the Guillemot family or Tencent buys the shares from the company’s minority investors. This solution would allow them not to have to present quarterly accounts, so the company would not plan short-term to please shareholders.
- Sale: The majority shareholders sell their shares to a private equity fund that takes over the company.
- CEO Change: Although the ownership of the company does not have to change, the current leaders could be removed from decision-making.
AJ Investments advocates for the return of games like Splinter Cell
“The Guillemot family and Tencent own 25% of the shares and 29.63% of the voting rights. Minority shareholders control around 70% of the company. Based on our discussions with other small owners, we believe we have enough voting power to challenge Guillemot (…) If we do not receive a response, we will join other minority shareholders who agree with our vision to push harder against Ubisoft’s management in accordance with French minority shareholders’ law,” concluded the investor group.
A real possibility of change
Does all this mean anything? The answer is yes. In 2007, a group of investors of Take-Two Interactive (the company that owns Rockstar and GTA) rebelled against the company’s managers and succeeded in taking control. This was how Strauss Zelnick became the CEO of the company. However, it is important to note that this happened after Ryant Brant (founder of the company and director until 2001) was found guilty of fraud for appropriating or distributing shares illegitimately with “participation and knowledge of senior executives and other members of Take-Two,” as reported by the U.S. Securities and Exchange Commission.
Take-Two changed leadership with a similar process.
The operation against Ryant Brant was successful because, beyond any strategic decision, the executive acted against the company’s interests. In the case of Ubisoft, things are not nearly as clear. One could argue that the company is declining and that the long-term plan is non-existent, but the results are not particularly negative. In this regard, AJ Investments will have a much harder time succeeding in their rebellion. Nevertheless, this is a very serious warning for the Guillemot family and may be one of their last opportunities to change the company’s business philosophy.
The future of Ubisoft depends largely on their ability to succeed with an Assassin’s Creed Shadows that they have never needed so much. Also, on being able to present follow-up proposals for their most beloved sagas and solutions to long-time dissatisfied shareholders. If all this goes wrong, I fear this will not be the last article about internal problems in the company.
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