Ubisoft shares experienced significant volatility on Friday following the company’s announcement that it is forming a new gaming subsidiary. This move comes after the French video game publisher revealed that Chinese tech giant Tencent is investing 1.16 billion euros ($1.25 billion) into the new subsidiary. The subsidiary will house Ubisoft’s most well-known game franchises, including Assassin’s Creed, Far Cry, and Tom Clancy’s Rainbow Six.
Initially, Ubisoft’s stock surged by as much as 11% in the morning, driven by investor optimism. However, by the afternoon, the stock reversed course and was down nearly 2%. Ubisoft’s new subsidiary aims to build “evergreen and multi-platform” gaming ecosystems, focusing on long-term game development. Tencent’s investment values the subsidiary at 4 billion euros, more than double Ubisoft’s current market capitalization.
The move was seen as a step towards addressing the uncertainty surrounding Ubisoft’s future. The company has faced several challenges in recent years, including financial struggles and delays in key game releases, such as Assassin’s Creed Shadows. In February, Ubisoft reported a 52% drop in fiscal third-quarter net bookings, attributed to underperformance in some of its major titles.
The structure of the deal is considered innovative, with the goal of maintaining the value of Ubisoft’s top franchises while keeping overall control within the Guillemot family, which owns Ubisoft. However, analysts believe Tencent’s influence could grow, particularly in expanding these franchises across platforms, including mobile and PC gaming, areas where Tencent has significant expertise.
Despite the positive market reaction to the announcement, some analysts are skeptical about the impact of the spinoff on Ubisoft’s future. They argue that the deal may add complexity to the company’s valuation, with the remaining part of Ubisoft struggling with high operating costs and debt. The deal is expected to close by the end of 2025, subject to regulatory approvals.
Ubisoft’s latest release, Assassin’s Creed Shadows, has received generally positive reviews, with an average score of 82 on Metacritic. However, many experts question whether the company’s restructuring will be enough to resolve its ongoing issues and improve its financial standing in the long term.
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