By Sagar Mankar 
A minority investor in Ubisoft has issued a strong warning to the company’s board over its declining performance and strategic missteps.
Juraj Krupa, representing Slovak hedge fund AJ Investments and Partners, penned an open letter addressing the leadership of Ubisoft’s founders, the Guillemot brothers, and their major backer, Tencent.
The letter highlights a range of concerns, from game delays and poor title performance to bloated staffing and management inefficiencies, calling for a significant overhaul to reverse a sharp drop in the company’s stock in recent years.
Key Concerns Raised by Minority Investors:
1. Poor Financial Performance: Ubisoft’s stock has plummeted by over 40% in the past year, reflecting what investors view as poor management decisions, game delays, and missed opportunities. The leadership under the Guillemot family is seen as prioritizing short-term goals over long-term strategy, leading to the release of mediocre games.
- Delays in Major Titles: Rainbow Six: Siege and The Division
- Failed Launches: Skull and Bones and Prince of Persia: The Lost Crown
- Mixed Reception for New Releases: While Star Wars Outlaws was highly anticipated, its reviews suggest it wasn’t fully ready at release, with mixed ratings (Metacritic 76%, IGN 7/10)
2. Blocked Acquisitions: Tencent and the Guillemot family have blocked private equity firms like KKR and Blackstone from acquiring Ubisoft, limiting growth opportunities.
3. Share Manipulation: Accusations that Guillemot and Tencent have manipulated the company’s stock valuation to buy shares at lower prices.
4. Operational Inefficiency: Ubisoft’s operational costs are significantly higher than industry peers, with 17,000 employees compared to other companies’ smaller teams that generate higher profits.
5. Undervalued Assets: Despite owning strong intellectual properties (IPs) like Assassin’s Creed and Rainbow Six, Ubisoft is deeply undervalued compared to competitors like Electronic Arts (EA) and Take-Two Interactive.
6. Dormant Franchises: Popular franchises like Rayman, Splinter Cell, For Honor, and Watch Dogs have been inactive for years, despite having large, loyal fanbases.
Demands for Change:
To address these concerns, Krupa has proposed several drastic changes:
1. Take Ubisoft Private or Allow a Sale: Propose taking the company private with Tencent’s involvement or allowing a private equity (PE) firm to acquire it for a fair price.
2. New CEO: They demand the hiring of a new CEO, replacing the long-standing CEO Yves Guillemot, who can streamline operations, reduce costs, and prioritize core IPs to improve profitability.
3. Cost Reductions: Implement aggressive cost-cutting measures, including possible studio sales (currently has over 30 studios) and layoffs. Investors say the recent 10% cut in the workforce is ok but not enough.
4. Focus on Core Franchises: Concentrate resources on developing hit franchises like Assassin’s Creed, Far Cry, and Rainbow Six instead of releasing multiple average titles.
The letter calls on fellow shareholders to support this push for change. Krupa claims that if the demands for taking Ubisoft private or initiating a sale are ignored, minority shareholders will invoke French minority shareholder laws to force action. According to Krupa, minority investors control 70% of Ubisoft’s shares, compared to the 25% held by the Guillemot family and Tencent, giving them significant leverage.
The open letter has escalated tensions at Ubisoft, potentially setting the stage for a battle over the future control of the gaming giant.
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