The IP portfolio and history are great, BUT when looking at what has been achieved in recent years and what’s in the pipeline, maybe the lightbulb will finally flick on for someone. History is no guarantee of the future!
The company’s hit games are all getting old. Goat Sim was a good joke 10 years ago; Deep Rock, Satisfactory, and Valheim have all finally reached full release mode, so it’s hard to see growth. The Roblox meta-game is dying a slow death. Teardown came and went. What’s next???
The company itself expects the figures to decline as they have to wait a while for the next hits.
Meanwhile, cash is burning and unfortunately, there is no guarantee of success. How much money will be burned until the next game breaks through? We don’t know! Maybe never… The downside is terrifying.
How many of the hit-making developers are still in-house? We don’t know, but the parent company Coffee Stain has certainly been leaking badly for a couple of years, and familiar names are popping up developing new hit games elsewhere.
However, the biggest challenge in my opinion is the vagueness of all the financial figures inherited from Empu (Embracer Group)!
Can the figures be trusted or can any conclusions be drawn when every line is adjusted after the previous lines have already been adjusted, and I suspect there is plenty of “hot air” in the balance sheet as well. The company asks us to look only at adjusted EBIT, but the real metric is perhaps Cash Flow, which is soon to be in the red—though that may or may not be due to the adjustments. I tried to figure out Empu’s (Embracer Group’s) similar accounting maneuvers back in the day, but it always went right over my head.
The company looks cheap now, but if and when the gaming market downturn hits this one too and no new hits are produced, the cash will dry up quickly and the valuation will unravel even faster.
The ownership structure is also somewhat questionable; Lars (Lars Wingefors), who built and then destroyed Empu (Embracer Group), is the largest shareholder and does whatever he wants with the company. Other shareholders are not listened to.